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Kingdom of Saudi Arabia: Suspension of specific provisions of the Companies Law

Kingdom of Saudi Arabia: Suspension of specific provisions of the Companies Law

The Ministry of Commerce has issued a Ministerial Resolution Number 348 eliminating specific provisions of the Companies Law. These exemptions are made to relieve entities from the burden of complying with specific requirements of the law which has been deemed impossible due to the pandemic. This temporary suspension affects limited liability companies and joint-stock companies.

Summary

A period of 12 months is granted to Limited Liability Companies to hold their general assembly meetings to approve their financial statements, previously this period extended only up to four months.

A period of 12 months is granted for filing financial statement reports with the Ministry from the date of preparation as opposed to a period of one month given before.

A shareholders’ resolution may be passed regardless of the number of shareholders; by the issuing circulars to that effect

In case of losses incurred by joint-stock companies and limited liability companies exceeds 50% of their capital, the governing bodies have been granted a more extended period to take action against the same

Automatic dissolution as enumerated under Article 150 or 181 has been rescinded

Auditors’ reappointment can be extended for seven consecutive years in cases of both joint-stock companies and limited liability companies

General assemblies of LLCs (Articles 167(2) & 175))

EarliAs per the resolution, the period of four months previously granted to LLCs to convene their general assemblies have been extended to a period of twelve months, following the end of the financial year.

Further, the period granted to send copies of documents to the Ministry and the shareholders has been extended from a period of one month to twelve months following the end of the financial year.

 The suspension, as mentioned above, shall become ineffective on the 31st of December 2020.

Circulars of Shareholders’ Resolutions

LLCs owned by more than 20 shareholders are prohibited from passing resolutions by circulation under Article 168(1). However, now, as per the Resolution shareholders can pass resolutions by circulation regardless of the number of shareholders.

This suspension is only effective until the 21st of October 2021.

Statutory period under Article(s) 150 and 181

Article 150

The Board of Directors of a joint-stock company shall call upon an extraordinary general assembly within sixty days extended from fifteen days from the date of the Board’s knowledge of the losses reaching 50% of the capital. Further, the period to hold an extraordinary general assembly has been increased from forty-five days to a period of 180 days from the date the Board has become aware of the losses.

Article 181

The period assigned to an LLCs manager for inviting shareholders, making decisions as to continuance or dissolution of a limited liability company has been increased from a period of ninety days to 180 days from the date of knowledge of losses extending up to 50% of the LLCs capital.

Appointment of Auditor

An external auditor appointed to serve limited liability companies and joint-stock companies has been extended to a period of seven years, which entails that, an external auditor that has served the company for five consecutive years may be reappointed for a further period of two years.

This extension period shall expire on the 3rd of March 2022.