Rights of shareholders under Saudi company law

Abstract

The thesis examines the efficacy of the provisions of Saudi Company Law 1965 in terms of protecting the rights of minority shareholders in joint stock companies (JSCs). The aim is to assess the effectiveness of the current form of SCL 1965 in this regard and to suggest a reform scheme. This research finds that SCL 1965 does not adequately provide minority shareholders with all the rights that they should enjoy. Accordingly, minority shareholders are often subject to the controlling influence of majority shareholders, who are generally in charge of the company’s management. As a result, minority shareholders either do not exercise or do not enjoy certain rights, and they therefore forfeit their natural and intended role under this law, which is to oversee and control the activities of the board of the company, and in so doing to defend their interests. Despite the Saudi government intentions to conduct a range of reforms, particularly in the field of trade, SCL 1965 has not been modified to any significant degree; it is still not sufficiently effective, and does not address many important points relating to shareholders’ rights in listed companies. Therefore, there are important decisions that need to be made on the part of the Saudi legislature in terms of improving the investment environment in KSA, including improving the level of protection for investors in JSCs; these decisions will help to attract more investors into the Saudi financial market. This thesis suggests ways in which to improve the level of protection for minority shareholders in Saudi listed companies against any encroachment on their interests within the company. In this respect, it suggests recasting the provisions relating to minority shareholders, especially SCL 1965.