The new corporate system … a family charter, banned business for the director, and rewards for whistleblowers and their protection

The details of the new Companies Act, consisting of 281 articles, were issued today. The system included the general provisions for companies, their transformation, merger, division, termination, liquidation, fines and final provisions.

With regard to family businesses, the system includes the partners’ agreement and the family agreement. The founders, partners, or shareholders, whether during or after the company’s incorporation period, may enter into one or more agreements governing the relationship between them or the company. including how their heirs enter the company, either themselves or through a company. They establish it for this purpose and also the conclusion of a family charter that includes the organization of family ownership in the company, its management and governance, the employment policy, the policy to employ family members, the distribution of profits, the alienation of shares or shares, the mechanism for resolving disputes or disputes, and other The company or its articles of association. It is determined that it does not violate the law, the company’s articles of association or its articles of association.
The system also touched on the issuance of debt instruments and financial instruments whereby the joint stock company has the right to issue “in accordance with the financial market system” tradable debt instruments or financial instruments The maximum number of shares that may be issued in exchange for those instruments or successes , whether those instruments or sukuk are issued simultaneously, or by a series of issues, or by one or more programs to issue them. New instruments or succucts that their holders request to convert immediately after the expiration of the conversion request period specified for the holders of those instruments or succucts, or when the conditions for their automatic conversion into shares or the expiration of the specified period for such conversion is adhered to. And the capital, and the board of directors must complete the procedures for each capital increase with the trade register.

With respect to the conversion of debt instruments and financial instruments, the company may convert debt instruments or financial instruments into shares in accordance with the financial market system, with the consent of the holder, whether this was a prior approval, as provided in the terms. of the issue or by a subsequent agreement.
With regard to the investigation of transgressions, a committee of the Ministry of Commerce shall be composed of not less than three members, headed by a person with legal qualifications, and it shall be involved in the investigation of the transgressions set out in Article 262 of the system, and the imposition of penalties in connection therewith, with the exception of infringements relating to public limited companies listed on the market. The Minister has the right to determine the offenses for which direct penalties may be imposed without submitting them to the committee, and the person against whom the sentence has been issued has the right to lodge a grievance with the competent court. within (thirty) days from the date of its notification in accordance with the manner of notification specified by the regulations. The committee’s rules of procedure are issued, and the remuneration of its chairman, members and secretariat is determined by a decision of the minister.
The system includes that non-profit companies are not subject to the provisions of the zakat levy and tax exemption, in accordance with regulations laid down by the Ministry of Trade and the Zakat Authority.

The company may be transformed into another form of company by a resolution issued in accordance with the conditions laid down to amend its articles of association or articles of association, and after compliance with the conditions of incorporation, registration and publication of the form in which the company assets to any form of company incorporated under the terms of the system. Such incorporation will not relieve the sole proprietors of their responsibilities for the debts and obligations of the sole proprietorships before the formation of the company, unless the creditors expressly accept it.
In terms of severe penalties, the system specified three years imprisonment and a fine of up to five million rial. As for less severe penalties, a fine of up to one million riyal and one year imprisonment.
The terms of the system apply to shares or shares owned by a waqf.

With regard to foreign companies, the system stipulates that the application for registration of the branch of the foreign company includes the date of the beginning and end of the financial year of the branch. With the exception of representative offices, the branch of the foreign company must prepare financial statements of its activities within the Kingdom in accordance with the accounting standards approved in the Kingdom, and deposit these documents and the auditor’s report According to the regulations, the appointment of an auditor may be made by a decision of the branch manager of ‘ a foreign company based on an authorization of the foreign company.

With respect to the reporting of violations, the competent authority may regulate the reporting of violations of the provisions of the law and regulations, including the determination of financial rewards for whistleblowers, checks for their payout and claim, and procedures contributing to their protection.

The regulations specify the financial compensation for the services provided by the competent authority for the implementation of the provisions of the system, for the full system details

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