Market Update: Saudi Arabia

Below are key takeaways from ISS’ recently released Market Update: Saudi Arabia. The full report is available to institutional subscribers by logging into ProxyExchange then selecting the Governance Exchange and its Report Center tab and to corporate subscribers by logging into Governance Analytics then selecting the Governance Exchange and the Report Center tab.

• Market positioning: With approximately 250 meetings in the first half of 2023, and approximately 350 meetings in the full year, Saudi Arabia is the largest market of coverage for ISS within the Middle East and North African and Sub-Saharan Africa markets.
• Significant market growth: Over the last five years, the number of listings has grown on the main and parallel markets. The government’s 2030 vision and related strategic plans have contributed to make the country one of the fastest growing economies in the region.
• Main AGM Season: main season typically runs from March through June, although meetings continue through the year.
• Legal framework changes: The 2023 Companies law (“the Law”) replaced the previous version of 2015, resulting in amendments to the corporate governance code. The Law eased procedures and regulatory requirements for the establishment of new companies and gives more flexibility to company management. Companies have a grace period of two years to comply starting from the date of entry into force of the Law, however many already implemented related changes in 2023 As a result, many companies proposed bylaws amendments during 2023 impacted the following topics:
  • General meetings: The Law included a provision which increased from five to ten percent the minimum shareholder ownership percentage required to be able to convene a general meeting. The approval process for the board report and financial statements was also modified so that the general meeting’s role has been limited to the review and the discussion of the documents, rather than their approval. The Law also removed the approval of the audit committee election from the prerogatives of the general meeting, which can now be approved by a board decision instead.
  • Board of directors: The Law extended the maximum board term from three to four years and the provision regarding the maximum number of seats on the board was removed.
    The updated code revised the definition of related parties by removing and modifying many cases previously covered under related party relationships.
  • Compensation update: The Law removed the annual remuneration cap of SAR 500,000 per director.

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