Corporate governance refers to a set of rules and regulations that organize the various relationships within a company, guide its management, and establish a framework for interaction between the board of directors, executive management, shareholders, and stakeholders. It aims to achieve both social and economic objectives.
Large companies require a precise and ideal governance system tailored to their nature, which helps them achieve their goals by implementing a series of policies and regulations that govern relationships among the company’s various parties.
The Importance of Corporate Governance
The significance of corporate governance becomes evident with the emergence of corruption cases and fraud in financial statements, as it plays a crucial role in combating administrative and economic failures in major companies.
Governance also highlights its importance by providing companies with better systems, ensuring stability and consistency, which attracts investors to this stable environment and enhances their trust in the company.
Additionally, it significantly contributes to protecting the rights of parties dealing with the company, such as shareholders and employees, ensuring their rights and clarifying their duties effectively.
The Legal and Regulatory Framework in Saudi Arabia
The Corporate Governance Regulations were issued by the Capital Market Authority’s Board on 16/5/1438H (February 13, 2017), based on the Companies Law to ensure effective and transparent management for companies listed in the Saudi financial market. These regulations were amended by a board decision on 25/6/1444H (January 18, 2023).
The regulations outline rules and standards that govern corporate management practices, preserve stakeholders’ rights, and assist in sustaining and improving company structures. These measures aim to attract investments, contributing to economic prosperity in the Kingdom.
The regulations include key definitions and provisions related to shareholder rights (such as rights associated with shares and the general assembly), disclosure and transparency policies, the board of directors’ responsibilities, structure, committees, and procedures. They also address corporate committees, conflict-of-interest policies for board members, and the implementation of governance.
The regulations have undergone several amendments to enhance transparency and protect shareholders’ rights, including strengthening the role of the board of directors.
Our Corporate Governance Services
Al Othman Law Firm provides comprehensive governance services, including:
- Designing internal regulations.
- Compliance consultations for local and international laws.
- Preparing compliance and audit reports.
- Corporate restructuring.
- Developing family charters.
- Risk management, with a focus on enhancing operational efficiency and achieving sustainable growth for companies.
Corporate Restructuring
We offer specialized consultancy to restructure companies, aiming to enhance operational efficiency and align organizational structures with growth strategies.
Organizational Structure Assessment to Improve Performance
Our services include evaluating organizational structures to improve decision-making processes and administrative operations efficiency.
Board Members’ Responsibilities
We provide specialized consultations to board members, enabling them to understand their legal and financial responsibilities fully, ensuring effective governance and protecting the company from legal risks.
Drafting Family Charters to Ensure the Sustainability of Family Businesses
Our team has extensive experience in negotiating and drafting optimal terms and agreements for our clients. We focus on delivering innovative legal solutions that protect contractual rights and achieve business objectives.
Developing Risk Management Policies
We create comprehensive risk management policies to ensure business sustainability by identifying, assessing, and mitigating potential risks.
Preparing Compliance and Audit Reports
We prepare internal audit and compliance reports to help companies identify weaknesses and ensure full adherence to legal and regulatory requirements.
Principles of Corporate Governance
Corporate governance refers to the framework of policies and guiding principles that define a company’s structure, decision-making process, and practices. This framework is based on four core principles:
- Accountability: This is not about assigning blame but about the company’s ability to justify its decisions.
- Transparency: Reflects the company’s disclosure of financial and administrative information.
- Fairness: Ensures the protection of all shareholders’ rights, including minority shareholders.
- Responsibility: The board of directors must exercise its authority responsibly due to the significant power it holds.
Benefits of Implementing Corporate Governance
- Identifying weaknesses and ensuring full compliance with legal and regulatory requirements to address them.
- Attracting new investors by increasing their confidence in the company’s system.
- Ensuring business continuity across generations in family-owned businesses.
- Improving financial performance, increasing profits, and enhancing the company’s market value.
- Avoiding legal and financial risks.
- Enhancing organizational structure, which improves strategic decision-making and operational efficiency.
Challenges of Implementing Corporate Governance in Saudi Arabia
- Lack of awareness about the importance of governance and limited resources to implement required standards.
- Resistance from some company stakeholders, such as employees, due to fear of change.
- High costs of governance implementation for small businesses, making it difficult for them to adopt governance practices.
- Challenges in attracting new investors to improve the company’s economic growth.
The Role of Corporate Governance in Saudi Vision 2030
Corporate governance has become a key aspect of achieving economic development and financial stability for companies in the Kingdom. It plays a significant role in Saudi Vision 2030 by driving substantial developmental strides in governance that go beyond successful management. Governance encompasses all aspects of public policy, promoting transparency, encouraging investment, and supporting the realization of the Vision.
Why Choose Al Othman Firm?
Our firm stands out for its high level of professionalism and extensive expertise in corporate governance. We are the best choice for companies aiming to develop their systems optimally by providing comprehensive support, covering all legal and administrative aspects, and ensuring the achievement of outstanding results.
Our Expertise
Al Othman Law Firm share some of the successes we’ve achieved in the field of corporate governance:
- Advising Friends Automotive FZE on drafting and implementing internal governance regulations, ensuring full compliance with local and international laws, and enhancing operational efficiency to achieve business objectives.
- Developing governance policies for Masarat Mosafer for Travel and Tourism and preparing the necessary audit reports to ensure full compliance with Saudi regulations in the tourism sector.
- Supervising the development of a comprehensive family charter for Zayatta Investments Ltd to ensure business sustainability across generations, along with providing specialized consultations on corporate restructuring to enhance administrative efficiency.
- Consulting for Gottman Industries to develop effective governance strategies aimed at improving organizational structure, enhancing strategic decision-making, and increasing operational efficiency.
- Drafting governance and compliance policies for Al-Mashrab Al-Raqi, conducting periodic reviews to ensure transparency and full adherence to local and international regulations in the food and beverage sector.
- Preparing comprehensive compliance reports for Jiyad Al-Yamama for Transport, ensuring adherence to Saudi regulations and offering specialized consultations to improve operational structure and efficiency.
- Developing risk management policies for Digital Shipping in the telecommunications and IT sector to ensure full compliance with industry-specific regulations and offering consultations to enhance administrative performance and ensure business sustainability.
- Providing consultancy services to Arabtec Jardanah & Partners for Engineering Consultancy in corporate restructuring, ensuring full compliance with governance regulations, and developing internal policies to enhance transparency and administrative effectiveness.
