Corporate Governance | How to protect your company from risks

Corporate Governance | How to protect your company from risks

In Saudi Arabia’s accelerating business environment, corporate governance is no longer a management option, but rather a systemic necessity to protect companies, enhance investor confidence, and ensure sustainability. 

As systems and regulations evolve, corporate governance controls play a pivotal role in regulating the relationship between partners, management and stakeholders, and reducing legal and financial risks, contributing to building more stable companies capable of safe growth and achieving long-term success.

What is the governance system in companies?

The Corporate Governance Regulations define governance as the rules for leading and directing a company. These rules include mechanisms for regulating the various relationships between the board of directors, executives, and shareholders, by establishing specific rules and procedures to facilitate the decision-making process and enhance its transparency and credibility.

Corporate Governance | How to protect your company from risks

 The importance of corporate governance in Saudi Arabia

• Clearly define roles and responsibilities.
• Improving the efficiency of company management and decision-making. 
• Comply with local and international regulations and avoid penalties and risks.
• Attracting investments and supporting the national economy.
• Strengthening the oversight, audit and review process. 
• Protecting the rights of shareholders and stakeholders.
• Achieving justice and competitiveness at work.

Governance pillars

• Transparency and clear disclosure of company data.
• Accountability is holding a company’s board of directors accountable for their decisions.
• Ensuring justice for all shareholders in the company without discrimination.
• Responsibility is the commitment of board members to act honestly and fairly to achieve the interests of the company. 

What are the types of corporate governance?

• Corporate governance in the private sector: This applies to companies subject to the corporate system, financial market systems, and executive regulations. Private sector governance aims to improve company management and ensure that its objectives are achieved with high efficiency.
• Government sector governance: It applies to government institutions and bodies in order to raise the efficiency of the government sector, accountability for public money, and provide services to citizens without discrimination.
• Financial governance: It focuses on developing plans for budget management and spending control to reduce corruption and financial waste, whether in the government or private sector. 
• E-governance: This is the digital transformation in accordance with Vision 2023, using modern technologies to improve management and services. Examples of this include the establishment of government platforms for government services and companies, such as the Najiz platform.

What are corporate governance controls?

What are corporate governance controls?

The Financial Market Authority’s Corporate Governance Regulations specify a number of controls to ensure companies’ commitment to implementing governance, namely:

• A company listed on the market must disclose the extent of its commitment to implementing the provisions of the regulation in its annual reports.
• The Authority supervises companies and reviews reports to verify their compliance with the provisions.
• The Authority imposes penalties on violating companies, ranging from financial fines to suspension of trading in the market.
• The Authority provides awareness and training programs for companies to help them understand and implement the requirements of the regulation.

Properly implementing corporate governance requires careful legal expertise in business systems and regulations.

How does governance work in companies?

Governance principles are achieved when a company commits to:

• Strictly define the powers of the Board of Directors and committees.
• Maintain all company reports and records, such as the articles of association, and ensure they are constantly updated.
• The Board of Directors meets periodically to review the company’s achievements and ensure the progress of business.
• Holding all company officials and employees accountable for any negligence that affects the company’s business.
• Commitment to disclose company data and records when requested by shareholders or competent regulatory authorities.
• Compliance with company policies and internal regulations.
• Compliance with the rules and regulations decided by the Authority.

Who are responsible for governance?

Who are responsible for governance?

It is the responsibility of the members of the Board of Directors and the company’s commercial lawyer to implement and adhere to governance within the company to achieve its own goals and interests.

Effective commitment to corporate governance in Saudi Arabia is not a formality, but a strategic step to protect your investments and enhance market confidence in your company.

Corporate Governance | How to protect your company from risks

Abdul Majeed Al Rashid Lawyer Office offers you a comprehensive range of commercial lawyer services, including:

• Drafting and reviewing legal memoranda related to commercial issues and corporate governance.
• Preparing and drafting all types of commercial contracts to protect your company’s rights and reduce risks.
• Representing you in commercial disputes and following up on lawsuits before the relevant judicial authorities and committees.
• Establishing companies and amending their structures in accordance with the corporate system and relevant regulations.
• Ensure compliance with business rules and regulations and provide ongoing legal advice for regulatory compliance.