CMA approves implementing regulations of New Companies Law for listed companies

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The Capital Market Authority's (CMA) board approved the Implementing Regulations of the New Companies Law for Listed Joint Stock Companies, to be effective as of Jan. 19.
 

The board resolution included amending six implementing regulations, which are: the implementing regulation of the companies law for listed joint stock companies; the corporate governance regulations, the merger and acquisition regulations; the rules on the offer of securities and continuing obligations; the procedures and instructions related to listed companies with accumulated losses reaching 20% or more of their share capital; and the Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority.

The New Companies Law was enacted by the Cabinet in mid-2022. 

Such amendments took into consideration stipulating the necessary rules to implement the provisions of the Law in addition to making the necessary amendments in line with the Law.
 

The main elements of the regulations included renaming “the Regulatory Rules and Procedures issued pursuant to the Companies Law relating to Listed Joint Stock Companies" to become “the Implementing Regulations of the Companies Law for Listed Joint Stock Companies".
 

This also included stipulating the provisions that aim to raise the level of governance of the board of listed joint stock companies, including: provisions related to board members' duty of care and duty of loyalty; determining the method of voting in the election of board members; stipulating the requirements related to a shareholder reserving a seat on the board pursuant to the company's bylaws; regulating the period in which board members shall continue in their capacity after the end of the Board tenure or the resignation of its members and until the election of a new board; setting the controls on the general assembly's delegation to the Board to authorize a board members' participation in any businesses that may compete with the Company or any of its activities; and developing the provisions related to the formation of the Audit Committee and stipulating which of those provisions apply to companies listed in the Parallel Market.
 

The elements also included setting out the maximum period for the external auditor's term; regulating the distribution of dividends to shareholders and what constitutes distributable profits; stipulating the provisions related to the issue and conversion of the types and classes pf shares; regulating the forward split or reverse split of shares; regulating the Squeeze-out and Sell-out provisions stipulated in Article 230 of the Law, including the relevant disclosure requirements and conditions for the offer price; and stipulating the provisions governing a company's demerger; and other matters.
 

In relation to the maximum period of the external auditor's term stated in Article (3) of the Implementing Regulation of the Companies Law for Listed Joint Stock Companies, and seeing as the period that an external auditor spent as an external of a company since the effective date of the Companies Law issued by Royal Decree (M/3) dated 28/01/1437H counts in calculating the aforementioned maximum period, the CMA Board's resolution included that companies must amend their positions in accordance with Article (3) of the Implementing Regulation of the Companies Law for Listed Joint Stock Companies within a period not exceeding two financial years from the its effective date on 26/06/1444H corresponding to 19/01/2023G.
 

The CMA also stated that the following amendments to the Corporate Governance Regulations shall be effective on Jan. 1, 2024. 
 

The provisions of the Corporate Governance Regulations issued by CMA Board resolution on Feb. 13, 2017, shall remain effective until the effective dated of the abovementioned amendments.