CMA Invites Public Feedback On Enhancing Governance Procedures For Board Member Removal And Profit Distribution

The Capital Market Authority (CMA) is inviting feedback from stakeholders in the capital market on proposed changes to governance procedures. These changes focus on the removal of board members and directors of listed companies, as well as the regulation of profit distribution. The consultation period spans 30 days, allowing participants to share their insights.

The draft aims to bolster investor protection by empowering shareholders to exercise their rights and oversee board performance. This initiative is expected to enhance governance standards and contribute to market stability in Saudi Arabia. Additionally, it seeks to introduce more regulatory flexibility in determining distributable profits, which are vital for assessing company performance.

Under the proposed draft, shareholders holding at least 10% of voting shares can request the removal of all or specific board members. This request can be made after six months from the start of the board's term. Furthermore, if a board member is convicted of a crime involving breach of trust, they must inform the board.

If a judicial ruling convicts a board member, the board should recommend their removal to the general assembly. This recommendation stands even if the member fails to notify the board about the ruling. The proposal ensures that removed members continue their duties until replacements are elected within 60 days.

The draft proposes greater flexibility for listed companies in calculating distributable profits. It removes the requirement to link profit determination strictly with audited annual financial statements. Companies can now use their latest financial statements, whether interim or annual, for this purpose.

This change allows companies to make distribution decisions based on more current financial data. By relying on recent financial statements, companies can better assess and distribute profits efficiently.

Feedback and Final Amendments

CMA emphasises that all comments from interested parties will be thoroughly considered before finalising amendments. This process aims to improve and develop the regulatory environment further. Stakeholders' input is crucial for shaping effective regulations that align with market needs.

The proposed amendments are available for review online through CMA's official website link provided in their announcement.

With inputs from SPA