Sadirat board members, external auditors convicted for Companies Law violations

Logo of Saudi Industrial Export Co. (Sadirat)

The General Secretariat of the Committees for the Resolution of Securities Disputes announced today, March 13, the issuance of a final decision by the Appeals Committee for the Resolution of Securities Disputes, Decision No. 3568/L.S/2024, on Nov. 28, 2024.

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The ruling convicted several board members, executives, audit committee members, and the external auditor of Saudi Industrial Export Co. (Sadirat) for violating the Companies Law.

This was part of a public penal case filed by the Public Prosecution after being referred by the Capital Market Authority (CMA).

The individuals convicted include Hatem Alsuhaibani, Chairman of the Board; Abdullah Almish'al, Board Member; Hazem Aldosari, Chief Executive Officer and Board Member; Salman Alsuhaibani, Chairman of the Audit Committee and Board Member; Ahmad Aloraini, Audit Committee Member and Board Member; Muhammad Alshuwai'er, Audit Committee Member; Mahmoud Metwally, Chief Financial Officer; and Ahmad Ahmad, Audit Manager at the External Auditor and later the company’s Accounts Manager.

The decision also applies to the Saudi Group for Accounting & Auditing - Aljasser & Aldakheel, which served as the company's external auditor.

The decision concluded with the conviction of the aforementioned individuals and entity for violating Article 211(a) of the Companies Law, issued by Royal Decree No. (M/3) dated 28/01/1437 H.

The violations included the registration of misleading information by the executive management in the financial statements for the period ended on Dec. 31, 2019, as well as the preliminary financial statements for March 31, 2020, and June 30, 2020. This resulted in the inflation of the company’s revenues by recognizing SAR 12.35 million in revenue from a deal with an establishment without meeting the necessary conditions for revenue recognition in accordance with accounting and auditing standards approved by the Saudi Organization for Certified Public Accountants (SOCPA).

The Audit Committee was also found to have participated in registering misleading information in the preliminary financial statements for June 30, 2020, by recognizing revenue from the same deal without fulfilling the required accounting and auditing conditions set by SOCPA.

Additionally, the CEO and board member failed to disclose this material fact in the preliminary financial statements for March 31, 2020, and June 30, 2020, with the intent to conceal the company’s financial position.

The board of directors was similarly negligent in including this material fact in the preliminary financial statements for June 30, 2020, with the same intent of concealing the company’s financial position.

Moreover, the board of directors and the Audit Committee delayed addressing this transaction in the preliminary financial statements for March 31, 2020, and June 30, 2020, despite concerns over the deal’s legitimacy. The matter was only addressed in the preliminary financial statements for September 30, 2020.

The external auditor, along with the audit manager and the company’s accounts manager, participated in registering misleading information in the financial statements for Dec. 31, 2019, and the preliminary financial statements for March 31, 2020.

Furthermore, the external auditor included misleading information in his report to the general assembly, stating that the company’s financial statements fairly presented its consolidated financial position and cash flows in accordance with approved international financial reporting standards.

The decision included the imposition of several sanctions on the convicted individuals and entities. Hatem Alsuhaibani was fined SAR 550,000, while Abdullah Almish'al was also fined SAR 550,000. Hazem Aldosari was sentenced to six months in prison and fined SAR 1.1 million. Salman Alsuhaibani received a fine of SAR 550,000.

Ahmad Aloraini was fined SAR 550,000, and Muhammad Alshuwai'er was also fined SAR 550,000. Mahmoud Metwally received a fine of SAR 650,000. Ahmad Ibrahim Ahmad was sentenced to six months in prison and fined SAR 750,000. The Saudi Group for Accounting & Auditing (Aljasser & Aldakheel) was fined SAR 650,000.

Any person affected by these violations is entitled to file a compensation claim, either individually or as part of a class action, with the Committee for the Resolution of Securities Disputes (CRSD) for damage suffered due to these violations.

However, such a claim must be preceded by a complaint filed with the Capital Market Authority (CMA). The General Secretariat of the CRSD will announce on its website if any class action is registered to allow other affected investors to apply and join the case.