The Board of the Capital Market Authority (Authority) issued its resolution on 15/09/1440H corresponding to 20/05/2019G adopting the amended Regulatory Rules and Procedures Issued pursuant to the Companies Law relating to Listed Joint Stock Companies, to be effective upon their publication date. These amendments come in continuance to Authority's objectives to regulate and develop the Capital Market and contribute to achieving its strategic objectives by enhancing confidence and raising the level of governance and disclosure in the Capital Market.
Among the most prominent amendments on the Regulatory Rules and Procedures are the amendment of Part 4 “Buy-back, Sale, Pledge of Shares". This amendment intends to facilitate the company's purchase of its shares, and as the Exchange quarterly discloses the listed companies' buy-back of its shares. The amendments also include adding a new part to the Regulatory Rules and Procedures which provides an authorisation framework for the businesses and contracts that are executed for the company's account in which a board member has direct or indirect interest pursuant to Article 71 of Companies Law, which was in light of the amendments on the Companies Law issued by Royal Decree number (M\79) dated 25/07/2018G.
The amendments to Part 4 “Buy-back, Sale, Pledge of Shares" include deleting the article in which obligating a Company, upon completion of each phase, to announce to the public the results of the Share buy-back transaction at least half an hour prior to the start of the trading session on the day following the completion of each phase of the buy-back transaction. The amendments also include requiring the company to immediately notify the Exchange of its transactions related to shares buy-back and the purpose of such buy-back in order for the Exchange to publish the shares buy-back transactions in the listed companies shares buy-back periodic report..
In regards to the authorisation framework for the businesses and contracts that are executed for the company's account in which a board member has direct or indirect interest pursuant to Article 71 of Companies Law, the amendments include granting the General Assembly the right to delegate its authorisation powers stipulated in paragraph (1) of Article 71 of the Companies Law to the company's Board of Directors, provided that the delegation is in accordance with the following conditions: (The total amount of business or contract or the total of the businesses and contracts during the fiscal year - is less than (1%) of the company's revenues according to the latest audited financial statements and less than 10 million Saudi Riyals, the business or contract falls within the normal course of the Company's business, the business or contract shall not include preferential terms to the board members and shall be in accordance with the same terms and conditions followed by the company with all contractors and dealers, and the business or contract shall not be part of the business and consultation contracts which a board member carries out by a professional license for the company in accordance with Article 3 of Regulatory Rules and Procedures). If these conditions are not fulfilled, an authorisation from the Ordinary General Assembly must be obtained.
Mr. Bader Balghonaim, the CMA Deputy of Legal Affairs & Enforcement, has stated that regulating the authorisation for the transactions and contracts that are executed for the company's account in which a board member has a direct or indirect interest comes in line with the amendments made to Article 71 of the Companies Law issued by Royal Decree number (M/79) dated 25/07/2018G, which granted the competent authorities to establish rules for the authorisation of transactions and contracts that are executed for the company's account in which a board member has interest. He also pointed out that the Authority, upon the preparation of the Rules for Authorisation, took into account the protection of shareholders' rights and safeguarding the powers of the General Assembly on one hand; and on the other hand, it aimed to achieve flexibility in obtaining the authorisation by enabling the General Assembly to delegate the authorisation of the Board of Directors in accordance with the conditions specified in the Regulatory Rules and Procedures, beside any other additional terms that the Ordinary General Assembly may specify.
The Authority clarified that it has carefully studied all the opinions and observations received during the public consultation period from the public and concerned people to the Regulatory Rules and Procedures, in which the Authority has received between period 19\11\2018 – 19\12\2018G. The Authority would also like to thank all those who contributed their views and observations during the period of public consultation.
The Guide of the Amended Regulatory Rules and Procedures can be viewed on the Authority's website via the following link:
The Amended Regulatory Rules and Procedures
Also, an explanatory guide of the authorisation for the transactions and contracts that are executed for the company's account in which a board member has a direct or indirect interest can be viewed on the Authority's website via the following link:
The explanatory guide