Crimes identified by the new corporate law in Saudi Arabia

Crimes identified by the new corporate law in Saudi Arabia

Disclaimer: This is a legal article that provides information that does not replace consulting a competent lawyer to help you and for more accurate information.

Crimes in Saudi Arabia’s new corporate law constitute an important aspect of the regulatory protection of companies and shareholders, as the Saudi regulator has identified a number of acts and violations that require accountability and regulatory penalties. 

With the diversity of crimes associated with managing, establishing and carrying out companies, the importance of knowing these crimes and their legal effects emerges to avoid violations and protect rights and interests. 

What are the types of crimes in the corporate law and its executive regulations?

Crimes and violations in the Saudi corporate system are divided into three sections:

Serious crimes in the new corporate law

Article 261 of the Companies Law stipulates a number of acts that constitute serious crimes punishable by the law, committed by individuals working in important positions within the company, such as the company’s director, auditor, liquidator, and others:

• Recording false and misleading data in financial statements or reports presented to partners or shareholders.
• Deliberately neglecting to mention essential facts in reports with the intention of showing the company’s financial position in a manner contrary to the truth.
• Using company funds or powers against the company for personal purposes.
• The liquidator uses the company’s funds, assets, or rights with third parties against the company’s interest or causes harm to partners, shareholders, or creditors to achieve personal purposes.

Non-serious crimes in the new corporate law

The acts stipulated in Article 261 of the Saudi Companies Law are considered less serious crimes committed by individuals who have authority in the company, or by employees or others, and they are as follows:

• The auditor does not report to the company any criminal violations he discovers during his work.
• Obtaining or being promised benefits in exchange for voting in a particular direction or not participating in voting in order to harm the interests of the company.
• Providing or promising benefits in exchange for voting or abstaining from voting in order to harm the company’s interests.
• Announcing, publishing, or declaring with the intention of giving the impression that a company that has not completed its registration procedures with the commercial registry has been registered.
• A public employee discloses company secrets to others that he has learned by virtue of his job.
• Publishing names of people contrary to the truth and considering them to be linked to the company or that they will be linked to it in order to meet quota values and attract subscriptions.
• Distributing profits or returns in bad faith in violation of the provisions of the Companies Law, its executive regulations, the company’s articles of incorporation, or its articles of association.
• Submitting false declarations or statements from partners, shareholders, or others regarding the evaluation of in-kind shares, the distribution of shares or stocks, or fulfilling their full value, knowing this.
• The director, official, member of the board of directors, or auditor shall not invite the general assembly of partners or shareholders upon learning of the achievement of the losses specified in the law.
• The director, official, member of the board of directors, or auditor exploits or discloses a company secret with the intention of harming it.
• Intentionally obstructing the work of those charged with a system by viewing the company’s papers, documents, accounts, records and documents, or refraining from enabling them to perform their work.
• The company inspector intentionally establishes false facts in his report or neglects to mention material facts that may affect the outcome of the inspection.

Violations of the Companies Law and its executive regulations

Violations of the Companies Law and its executive regulations

Article 262 clarifies the acts that constitute a violation punishable by the law, which are:

• Causing disruption to the General Assembly’s invitation to partners or shareholders or its convening.
• Preventing a partner or shareholder from participating in a shareholders or partners’ association or preventing him from enjoying the voting rights associated with his shares or stocks in the company.
• The General Assembly shall not invite partners or shareholders to meet within the period specified in the regulations.
• A member of the board of directors of a joint-stock company obtains a guarantee or loan from the company.
• Failure to perform the duty of maintaining the company’s accounting records and supporting documents or in preparing financial statements in accordance with the accounting standards approved in Saudi Arabia and depositing them.
• Failure to provide the competent authority with the documents stipulated in the system.
• Failure to make the necessary documents available to the partner or shareholder.
• Failure to prepare and record minutes of meetings.
• Failure to include basic data in company documents such as company name, capital, etc. mentioned in Article 12 of the system.
• Carrying out or continuing to carry out the work of an auditor, knowing that there are reasons preventing him from carrying out those works.
• The company or amendments to the company’s articles of association or bylaws shall not be registered with the commercial registry.
• Signing company documents that contain false data or violate the provisions of the system, or registering them with the commercial registry.
• The director or member of the board of directors of a professional company violates the controls regulating the activity of professional companies contained in the system.
• The director, member of the board of directors, or sole owner of a professional company practicing a liberal profession without a license.
• The liquidator shall not register the decision to appoint him or announce the decision to end the liquidation and register it with the commercial registry.
• Failure to take the necessary corrective measures to address the violation committed after notifying the company.
• Failure of the auditor to carry out his duties stipulated in the regulations.
• Failure to comply with the provisions of the system and regulations or to comply with decisions issued by the competent authority without reasonable cause.

Avoid legal risks and protect your company’s interests by hiring a specialized commercial lawyer from the office of Lawyer Abdul Majeed Al Rashid, to help you understand the provisions of the new corporate system and deal with commercial violations and crimes in accordance with Saudi regulations.

What are the elements of crimes in the Saudi corporate law?

What are the elements of crimes in the Saudi corporate law?

• Existence of a regulatory text: The Companies Law and its executive regulations stipulate a number of crimes and violations punishable by the law.
• The act committed by the perpetrator: The perpetrator commits the criminal act himself.
• Criminal intent: the perpetrator’s awareness of the act he committed of his own free will without coercion or threat.
• The result that occurred due to the act committed by the offender: The act must lead to the occurrence of the crime whose punishment is stipulated in the system.

What is the penalty for crimes and violations included in the Companies Authority Experts Law?

• Punishment for committing serious crimes: The offender shall be punished in accordance with Article 260 of the system with the following penalties:
  • Imprisonment for a period not exceeding 3 years.
  • A fine not exceeding 5 million Saudi riyals, or one of these two penalties.
• Punishment for committing non-serious crimes: The offender who commits a non-serious crime in accordance with Article 261 of the Law shall be punished with the following penalties:
  • Imprisonment for a period not exceeding one year.
  • A fine not exceeding one million Saudi riyals, or one of these two penalties.
• Punishment for committing violations: Article 262 of the system stipulates that the perpetrator of the violation shall be punished with a fine not exceeding 500,000 Saudi riyals.

Which authority is responsible for examining the crimes and penalties stipulated in the new corporate law?

• Public Prosecution: Article 265 of the Saudi Companies Law clarifies that the Public Prosecution is competent to investigate and prosecute serious and non-serious crimes contained in Articles 260 and 261 of the law.
• Securities Disputes Resolution Committee: The committee is responsible for reviewing and adjudicating all civil and criminal cases related to joint-stock companies listed on the financial market.
• Capital Market Authority Council: The Authority Council is responsible for imposing the penalties prescribed for violations stipulated in the system, except for violations of the joint stock company.

How can I file a complaint for violating the corporate law?

Any person can submit a report to the Ministry of Commerce upon discovering a violation punishable by the Companies Law and the Assembly of Experts through the Ministry’s website. 

The whistleblower must fill out his personal data, the whistleblower’s data, the company’s data and the type of violation, and then submit the application.

Familiarity with crimes in the new corporate system and the penalties resulting from them helps companies comply with Saudi regulations and avoid legal accountability. 

“To ensure the integrity of the procedures and protect your company’s interests, contact a competent commercial lawyer from the office of Lawyer Abdul Majeed Al Rashid to obtain legal advice that supports your decisions and protects your rights.”