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VISION لا 2.30 الاملكه العربيه السعوديه KINGDOM OF SAUDI ARABIA وزاره التجاره Ministry of Commerce Implementing Regulations of The Companies Law +966 11 294 4444 | Riyadh 11162 الرياض F @ SaudiMCI Kingdom of Saudi Arabia | المملكه العربيه السعوديه www.mci.gov.sa [Non-Text] وزاره التجاره Ministry of Commerce CONTENTS VISION 2013 2-30 ال Estimates المطبيه السعوديه KINGDOM OF SAUDI ARABIA IMPLEMENTING REGULATIONS OF THE COMPANIES LAW .... 3 PART 1: GENERAL PROVISIONS .... 3 CHAPTER 1: COMPANY INCORPORATION .... 4 CHAPTER 2: COMPANY FINANCES....4 CHAPTER 3: COMPANY MANAGEMENT .... 6 PART 2: UNLISTED JOINT-STOCK COMPANIES....7 CHAPTER 1: BOARD OF DIRECTORS....7 CHAPTER 2: SHAREHOLDER ASSEMBLIES ....9 CHAPTER 3: COMPANY'S PURCHASE OF ITS SHARES .... 12 CHAPTER 4: SHARE PLEDGE RULES....14 CHAPTER 5: RULES FOR THE ISSUANCE AND CONVERSION OF SHARES .... 15 CHAPTER 6: SELLING SHARES AT PUBLIC AUCTION .... 16 CHAPTER 7: ISSUANCE AND SALE OF PREEMPTIVE RIGHTS RESULTING FROM CAPITAL INCREASE...... 17 PART 3: LIMITED LIABILITY COMPANIES.... 18 CHAPTER 1: COMPANY MANAGEMENT .... 18 CHAPTER 2: THE COMPANY'S CAPITAL .... 18 CHAPTER 3: PURCHASING, PLEDGING AND ACCEPTING INTEREST PLEDGES.... 19 PART 4: NON-PROFIT COMPANIES.... 19 PART 5: PROFESSIONAL COMPANIES 21 CHAPTER 1: CONDITIONS AND RULES FOR INCORPORATING PROFESSIONAL COMPANIES AND PRACTICING A PROFESSION 21 CHAPTER 2: MANAGEMENT OF PROFESSIONAL COMPANIES 23 PART 6: CONVERSION, MERGER, AND DIVISION OF COMPANIES......24 PART 7: FINAL PROVISIONS....26 ANNEXES: 27 +966 11 294 4444 | Riyadh 11162 Kingdom of Saudi Arabia | المملكه العربيه السعوديه f 📧 SaudiMCI www.mci.gov.sa 2 [Non-Text] وزاره التجاره Ministry of Commerce VISION لبنان 230 ال المملكه العربيه السعوديه KINGDOM OF SAUDI ARABIA Implementing Regulations of the Companies Law Part 1: General Provisions Article 1: Definitions 1. The terms and expressions set forth in these Regulations shall have the meanings indicated in Article 1 of the Companies Law issued by Royal Decree No. (M/132), dated 1/12/1443H. 2. Wherever contained herein and unless the context requires otherwise, the following terms and expressions shall have the meaning ascribed thereto: <table><tr><td>Regulations:</td><td>The Implementing Regulations of the Law.</td></tr><tr><td>Registered Shareholder:</td><td>A shareholder registered in the Shareholder Register at the end of the day of the extraordinary general assembly convened to approve the company's capital increase and the issuance of related new shares, or at the end of the dividend due date specified by the general assembly or the board of directors, as the case may be.</td></tr><tr><td>Cumulative Voting:</td><td>A method of voting for electing board members that gives the holder of voting shares a voting capacity equivalent to the number of shares he owns, and by which the shareholder is entitled to either exercise all of his votes towards one nominee or to divide his votes towards several nominees without any duplication of such votes.</td></tr><tr><td>Purchased Shares:</td><td>Shares bought back by the company in Article 114 of the Law.</td></tr><tr><td>Treasury Shares:</td><td>Purchased Shares which are retained by the company</td></tr><tr><td>Employees' Shares:</td><td>Treasury Shares which are allocated by the company to its employees.</td></tr><tr><td>Preferred Shares:</td><td>Shares issued by the company that give their owners preferential rights over ordinary shares, without entitling them to vote in the general assembly.</td></tr><tr><td>Redeemable Shares:</td><td>Shares issued by the company that are redeemable at the company's discretion and in accordance with redemption terms and conditions.</td></tr><tr><td>Retained Earnings:</td><td>The cumulative net profit or loss balance as at the date of the financial statements for the previous years and the current year, post-adjustments for any dividends or setting aside for reserves, or any other modifications made thereto as a result of applying approved accounting standards.</td></tr><tr><td>Profession:</td><td>A profession through which a person provides services to others, in a professional manner and based on experience, qualification, talent or skill, and after obtaining the permit required therefor from the authority concerned with supervising and controlling such Profession.</td></tr><tr><td>Remuneration:</td><td>Amounts, allowances, percentage of net profits and their equivalent, periodic and annual performance-related bonuses, short and long term incentive plans, in addition to any other in-kind benefits, except for reasonable expenses actually incurred by the company on behalf of members of the board of directors in the performance of their duties.</td></tr><tr><td>Accredited Valuer:</td><td>A natural or legal person licensed in accordance with the Accredited Valuers Law, issued by Royal Decree No. (M/43), dated 9/7/1433H.</td></tr></table> +966 11 294 4444 | Riyadh 11162 Kingdom of Saudi Arabia | المملكه العربيه السعوديه YouTube SaudiMCI www.mci.gov.sa 3 [Non-Text] وزاره التجاره Ministry of Commerce VISION 230 المركزي المطربه السعوديه KINGDOM OF SAUDI ARABIA Chapter 1: Company Incorporation Article 2: Incorporation of the Company and Amendment of the Articles of Incorporation or Articles of Association 1. Verifying the identity of founders or partners upon incorporation of a company or amendment of the articles of incorporation thereof shall be done using the data recorded by the National Information Center, or through the Commercial Register, or the authority concerned with authentication in cases determined by the Ministry in coordination with the Ministry of Justice. 2. Amending the articles of association of joint-stock companies or simplified joint-stock companies requires providing the Commercial Register with the decision of the extraordinary general assembly or the Shareholders approving the amendment, as well as the necessary documents and requirements. Article 3: Report on the Valuation of In-kind Contributions to the Company's Capital Subject to the provisions governing the valuation of in-kind contributions stipulated in the Law, the period between issuance of the Accredited Valuer's report on the fair value of in-kind contributions to the capital of joint-stock companies, simplified joint-stock companies and limited liability companies, and the issuance of the corresponding interests or shares, shall not exceed six months. Article 4: Partnership Agreement and Family Charter In implementation of the provisions of paragraph (2) of Article 11 of the Law, the quorum for amending the partners' or shareholders' agreement or the family charter if it is part of the company's articles of incorporation or articles of association shall be in accordance with the conditions prescribed for amending the company's articles of incorporation or articles of association according to the form of the company. Chapter 2: Company Finances Article 5: Filing of Financial Statements The manager or the chairman of the board of directors of the company shall file the financial statements and the auditor's report, if any, with the Saudi Business Center through the electronic filing of financial statements program. Article 6: Appointment and Term of Office of the Company's Auditor Subject to the terms stipulated in relevant laws and regulations, and the provisions set forth in the Code of Conduct and Ethics applicable to the accounting profession as approved in the Kingdom, the partners, general assembly, or shareholders shall appoint one or more auditors, taking into account the following: (a) The term of office of an individual auditor shall not exceed 10 consecutive fiscal years. (b) The term of office of an auditing firm shall not exceed 10 consecutive fiscal years, after the lapse of which, said auditing firm may be reappointed based on the recommendation of the Audit Committee, if any, or the existence of other offers to audit the company's accounts, provided that the total term of office of the auditing firm does not exceed 20 consecutive fiscal years, and the term of office of the partner supervising the audit does not exceed 10 consecutive fiscal years. (c) A person who suspended auditing work for a period of less than two fiscal years may be re-appointed for the remaining period of the maximum terms stipulated in paragraphs (a) and (b) of this Article. (d) Whomever exhausted the maximum terms stipulated in paragraphs (a), (b) and (c) of this Article may be re-appointed after the lapse of two fiscal years after the date upon which his term of office has expired. +966 11 294 4444 | Riyadh 11162 alh Kingdom of Saudi Arabia | المملكه العربيه السعوديه YouTube | SaudiMCI www.mci.gov.sa 4 [Non-Text] وزاره التجاره Ministry of Commerce VISION 2016 230 المركزي المطربه السعوديه KINGDOM OF SAUDI ARABIA Article 7: Criteria for Designating a Company as Micro or Small 1. Under paragraph (1) of Article 19 of the Law, companies shall be designated micro or small companies during a fiscal year when two of the following are met: (a) The total revenues thereof do not exceed 10 million Saudi riyals. (b) The asset value thereof does not exceed 10 million Saudi riyals. (c) The number of employees thereof does not exceed 49. 2. When filing the financial statements, the company's manager or chairman of the board of directors shall include a statement indicating that the requirement to appoint an auditor is not applicable to the company, and that no partner or shareholder or more representing the percentage prescribed in paragraph (3) of Article 19 of the Law has submitted a request to appoint an auditor. Article 8: Rules for Requesting the Appointment of an Auditor 1. The request for the appointment of an auditor shall be in accordance with paragraph (3) of Article 19 of the Law, in accordance with the following rules: (a) The request shall be submitted in writing to the company's manager or board of directors. (b) The application shall be submitted at least 30 days before the end of the company's fiscal year. 2. Upon receiving the request referred to in paragraph (1) of this Article, the company's manager or board of directors shall invite the partners, general assembly, or shareholders to vote on appointing an auditor, in accordance with the provisions prescribed for the appointment thereof. Article 9: Obligations of the Auditor Subject to the provisions of paragraph (3) of Article 20 of the Law, work carried out by a company's auditor shall be undertaken in accordance with the Code of Conduct and Ethics applicable to the accounting profession as approved in the Kingdom and any instructions issued in that regard by the Saudi Organization for Chartered and Professional Accountants. Article 10: Rules of Distribution of Dividends 1. Companies may distribute interim dividends to partners or shareholders if the articles of incorporation or articles of association thereof so provide, after fulfilling the following: (a) That the partners, general assembly, or shareholders authorize the company's manager or board of directors to distribute interim dividends in accordance with a decision issued annually in that regard. (b) That the company has reasonable liquidity and can foresee the scale of its profits. (c) That, according to the latest financial statements, the company has distributable dividends that are sufficient to cover the proposed dividend distribution, after deducting any dividend amounts distributed and capitalized subsequent to the dates of said financial statements. 2. Distributable dividends consist of the balance of Retained Earnings appearing in the statement of financial position prepared at the end of the period directly preceding the period during which the distribution decision is taken, in addition to the balance of any distributable reserves. 3. Distributable reserves are reserves formed from profits that have not been allocated for specific purposes, or those subject to a decision canceling the purpose for which they were formed. +966 11 294 4444 | Riyadh 11162 alh YouTube | SaudiMCI Kingdom of Saudi Arabia | المملكه العربيه السعوديه www.mci.gov.sa 5 [Non-Text] وزاره التجاره Ministry of Commerce VISION ولي ٢٤٠٤٥ العربيه السعوديه KINGDOM OF SAUDI ARABIA Chapter 3: Company Management Article 11: Duty of Care and Duty of Loyalty Subject to the provisions of Article (26) of the Law, the company's manager or members of its board of directors shall comply with the following: (a) Exercising their powers in accordance with the Law and Regulations, the company's articles of incorporation or articles of association and other relevant laws, to achieve the purposes for which those powers were granted. (b) Acting in good faith to achieve the interests of the company, making sure to undertake all actions that would promote the success and growth of the company, ensure its continuity, and maximize its value for the benefit of partners or shareholders. (c) Exercising their duties objectively and impartially with regard to managing the company and making decisions thereat, while avoiding circumstances that would affect their impartiality when making decisions or voting thereon. (d) Carrying out their duties and responsibilities with the reasonable skill of a diligent person, subject to the general knowledge and experience personally possessed thereby, and those expected of a person assuming such a position. (e) Avoiding circumstances that may give rise to a conflict of interest, and disclose them in accordance with the provisions of the Law and regulations. (f) Not exploiting their position, duties and powers vested therein as company manager or members of its board of directors in any way, to obtain benefits from third parties. Article 12: Exploiting the Company's Investment Opportunities In implementation of the provisions of paragraph (3) of Article 27 of the Law, neither the company manager nor a member of its board of directors may exploit the investment opportunities offered to the company or said manager or board member in his capacity as a manager or a member of its board of directors when any of the following is met: (a) If the investment opportunity falls within the company's usual activities. (b) If the company is interested in benefiting from the investment opportunity or is expected to benefit therefrom. Article 13: Partners' Authorization to the Manager of a General Partnership in Cases of Conflict of Interest or Competing Business Without prejudice to the provisions of Article 40 of the Law, the manager of a general partnership may not: (a) Contract for his own account with the company except as authorized by all partners for each case separately. The partners may delegate one or more directors to issue such authorization to any of the company's managers when several exist. (b) Carry out an activity similar to the company's activities except as authorized by all partners on an annually renewable basis. The partners may delegate one or more managers to issue such authorization to any of the company's managers when several exist. +966 11 294 4444 | Riyadh 11162 Kingdom of Saudi Arabia | المملكه العربيه السعوديه f@SaudiMCI www.mci.gov.sa 6 ● ● ● ● ● ● [Non-Text] وزاره التجاره Ministry of Commerce VISION ليق 230 ال المملكه العربيه السعوديه KINGDOM OF SAUDI ARABIA Part 2: Unlisted Joint-Stock Companies Chapter 1: Board of Directors Article 14: Election of Board Members 1. Members of a company's board of directors shall be elected by the ordinary general assembly using the cumulative voting method. However, ordinary voting may be used if the company's articles of association so stipulate. 2. Without prejudice to the provisions of the Law, the company's articles of association may provide for the right of a company shareholder whose percentage of ownership of the company's voting shares satisfies the percentage determined by the company's articles of association to reserve seats on the board for the appointment of the nominee thereof. A shareholder vested with such right may not participate with other shareholders in electing the remaining members of the board of directors. Article 15: Expiration of the Term of Board of Directors or Resignation of its Members 1. In the event that a company's board of directors is not elected for a new term and the term of the current board expired, then its members shall continue to carry out their duties until the election of a board of directors for a new term, provided that the continuity period of members of an expired board shall not exceed 90 days from the board's expiry date; and the board shall undertake all necessary procedures to elect a new board before the expiry of the continuity period specified in this paragraph. 2. In the event that the chairman and members of the board resign, they shall call for the Ordinary general assembly to convene in order to elect a new board, such resignation shall not be effective until a new board is elected, provided that the period of such continuation of the resigned board does not exceed 120 days from the date of such resignation. Article 16: Rules Pertaining to Delegating the Board Authority based on the Approval of the General Assembly with Regard to Transactions and Contracts 1. The general assembly may delegate the authority stipulated in paragraph (1) of Article 27 of the Law to the company's board of directors, if the following conditions are met: (a) That the total value of the transaction or contract - or the sum of the transactions and contracts during the fiscal year - is less than (one percent) of the company's revenues as recorded in the latest financial statements, and is less than 10 million Saudi riyals. (b) That the transaction or contract are within the usual activity of the company. (c) The transaction or contract shall not include preferential conditions for a board member, and shall be at the same conditions and terms that the company adopts with all persons and contractors with whom it deals. 2. Every member of the board of directors with a direct or indirect interest in any transaction or contract shall be responsible for the calculation of the total value referred to in paragraph (1/a) of this Article during one fiscal year. 3. The maximum delegation period shall be one year from the date of approval by the general assembly or until expiry of the delegated board's term, whichever is earlier. 4. Board members are prohibited from voting on items pertaining to delegation and the revocation thereof in the general assembly. 5. The general assembly shall have the right to add additional conditions to those set forth in this Article. +966 11 294 4444 | Riyadh 11162 لارياض Kingdom of Saudi Arabia | المملكه العربيه السعوديه YouTube | SaudiMCI www.mci.gov.sa 7 [Non-Text] وزاره التجاره Ministry of Commerce VISION à Jg 230 المركبه العربيه السعوديه KINGDOM OF SAUDI ARABIA Article 17: Indirect Interest A board member's interest shall be deemed indirect if the transactions and contracts executed for the company's account may result in financial or non-financial benefits to, without limitation, the following categories: (a) The relatives of the board member. (b) A partnership, limited partnership or limited liability company where a board member or any relatives thereof is a partner. (c) A joint-stock company or simplified joint-stock company in which a board member or relatives thereof, individually or collectively, own 5% or more of the total shares thereof. (d) An entity - other than companies - in which a board member or relatives thereof hold a shareholding or managerial position. (e) A company in which a company board member or relatives thereof are managers, members of its board of directors or senior executives. Article 18: Rules Pertaining to Delegating the Board Authority based on the Approval of the General Assembly with Regard to Competing Businesses 1. The ordinary general assembly may delegate the authority stipulated in paragraph (2) of Article 27 of the Law to the company's board of directors, provided that the decision of the general assembly determines the criteria applicable to any competing businesses and activities that the board may permit during the delegation period, unless the company has a specific policy in that regard. 2. The maximum delegation period shall be one year from the date of approval by the general assembly or until expiry of the delegated board's term, whichever is earlier. Article 19: Disclosing Competing Business and Obtaining Approval A board member wishing to engage in a business that competes with that of the company, or compete therewith in one of the activity categories carried out thereby, shall: (a) Notifying the board of directors of the competing businesses that the member wishes to engage in, and record said disclosure in the minutes of the board of directors meeting. (b) Not participating in voting on the decision issued in this regard by the board of directors and general assembly. (c) Notifying the board of directors or general assembly, at the convening thereof, of the competing business that the board member wishes to engage in, unless the board is delegated the authority to permit competing activities. (d) Obtaining authorization from the general assembly or delegated board, as the case may be, allowing said member to engage in competing business, which shall be renewed annually. Article 20: Refusal to Grant Authorization 1. If the general assembly rejects granting the authorization pursuant to paragraphs (1) and (2) of Article 27 of the Law, then the board member shall tender his resignation within a period specified by the general assembly; otherwise, his membership on the board shall be deemed terminated, unless he decides to withdraw from such transaction, contract, or competing activity prior to the end of the period set by the general assembly. +966 11 294 4444 | Riyadh 11162 لاباش SaudiMCI Kingdom of Saudi Arabia | المملكه العربيه السعوديه www.mci.gov.sa 8 [Non-Text] وزاره التجاره Ministry of Commerce VISION and 30 الموزمه العربيه السعوديه KINGDOM OF SAUDI ARABIA 2. If the board of directors rejects granting the authorization, then the board member shall tender his resignation within a period specified by the board of directors; otherwise, his membership on the board shall be deemed terminated, unless he decides to withdraw from such business, contract, or competing activity prior to the end of the period set by the board of directors. Article 21: Rules of Remuneration of Members of the Board of directors 1. Without prejudice to the provisions of the Law and Regulations, as well as other relevant laws and regulations issued by the competent authorities, the following rules shall be taken into account in determining the Remuneration of board members: (a) Remuneration shall be fair and commensurate with the member's competencies, duties and tasks entrusted thereto, in addition to the objectives set by the board of directors to be achieved during the fiscal year. (b) Remuneration shall be commensurate with the company's activity and the skill required for the management thereof. (c) Take into consideration the size of the company, and experience of its board members. (d) Remuneration shall be appropriate to attract, motivate and retain highly qualified and experienced board members. 2. The Remuneration of board members may vary in amount to take into account the member's experience, specializations, duties, and number of sessions attended thereby, as well as other considerations. 3. The Remuneration of independent board members shall not be a percentage of the profits realized by the company, nor shall it be based directly or indirectly on the company's profitability. 4. In its annual report, the board of directors shall disclose details of the Remuneration policies, and mechanisms for determining such Remuneration, including amounts and in-kind benefits paid to each board member in exchange for any executive, technical, managerial, or advisory work or position. Article 22: Non-entitlement or Reimbursement of Remuneration 1. If the ordinary general assembly decides to terminate the membership of a board member who failed to attend three consecutive meetings or five non-consecutive meetings during the course of his membership without an excuse acceptable to the board, then such member shall not be entitled to any remuneration for the period following the last meeting attended thereby, and he shall reimburse all remuneration amounts paid thereto for that period. 2. If it is determined that remuneration paid to any board member was based on incorrect or misleading information, then such board member shall reimburse the remunerations to the company, which shall be entitled to request reimbursement thereof from the board member. Chapter 2: Shareholder Assemblies Article 23: Rules Pertaining to Extending Invitations through Means of Technology The company's board of directors may extend invitations to attend general or special assembly meetings through means of technology that allow the following: (a) The possibility of documenting the content of the invitation and the transmission date and time thereof. (b) The possibility of determining the identity of the sender and receiver thereof. +966 11 294 4444 | Riyadh 11162 لاباش Kingdom of Saudi Arabia | المملكه العربيه السعوديه SaudiMCI www.mci.gov.sa 9 [Non-Text] وزاره التجاره Ministry of Commerce VISION and 30 المواكه العربيه السعوديه KINGDOM OF SAUDI ARABIA Article 24: Holding a General or Special Assembly through Means of Technology 1. Shareholders may participate in the meetings and deliberations of general or special assemblies, and have access to the agendas and related documents thereof, through means of technology, in accordance with the following rules: (a) Shareholder participation shall be through real-time audiovisual transmission of the general or special assembly meeting. (b) Shareholders shall be able to actively participate in the general or special assembly meeting in a timely manner that enable them to listen to and follow presentations, express opinions, discuss and vote on decisions. 2. The company may allow shareholders to vote electronically on general or special assembly agenda items, even if they did not attend said meetings, in accordance with the following: (a) Electronic voting shall allow shareholders to cast their votes, whether before or during the general or special assembly meeting, without the need to appoint a proxy to attend on their behalf. (b) Electronic voting on the agenda items of general or special assembly meetings shall commence after the date of sending the invitation, provided that the period set for electronic voting shall not be less than three days prior to the date of the assembly. Electronic voting on any item on the agenda of the general or special assembly shall cease when discussions and voting on the item are concluded at the general or special assembly. 3. Holding meetings of a general or special assembly of shareholders through means of technology shall not preclude holding such meetings at the place specified in the invitation, and granting shareholders the right to attend those meetings in person. Article 25: Verifying the Identity of Participants through Means of Technology In the event that a general or special assembly is held means of technology, the company's board of directors shall set the necessary procedures to verify the identity of shareholder who voted electronically, as well as shareholder who participated, and the right thereof to vote on any of the meeting's items. Article 26: Attendance Quorum and Validity of Decisions The attendance and votes of shareholders participating in a general or special assembly through means of technology and electronic voting shall be counted towards the quorum required for the validity of the assembly meeting and the issuance of decisions. Article 27: Delegation of Authority to Attend Assemblies 1. A shareholder may authorize - in writing - another person from among shareholders or third parties who are not members of the company's board of directors to attend general or special assembly meetings on their behalf and vote on agenda items, using the proxy form attached to the meeting invitation issued by the company as set forth in Form No. (1) annexed hereto, or by virtue of a power of attorney that expressly stipulates the right of the proxy to attend the general or special assembly meeting and vote on the agenda items thereof. 2. Unless otherwise stipulated in the proxy form or power of attorney, the latter shall be valid for the general or special assembly meeting that follows their issuance or any subsequent meeting to which the first meeting was postponed. +966 11 294 4444 | Riyadh 11162 لارياض Kingdom of Saudi Arabia | المملكه العربيه السعوديه SaudiMCI www.mci.gov.sa 10 [Non-Text] وزاره التجاره Ministry of Commerce VISION and 230 المركبه العربيه السعوديه KINGDOM OF SAUDI ARABIA Article 28: Certifying the Validity of the Signature on the Proxy Form 1. The shareholder, if a natural person who is a resident of the Kingdom, or a legal person incorporated therein, must, through one of the following entities, certify the authenticity of the signature on the proxy form issued thereby: (a) The Chamber of Commerce in which said shareholder is a member. (b) A licensed bank, or a CMA Authorized Person, provided that the principal has an account with the bank or the Authorized Person. (c) A notary public or person authorized to engage in notarial work. (d) Other persons or entities approved by the Ministry. 2. If a natural person who is not a resident of the Kingdom, the shareholder shall send the company a proxy form signed thereby and duly certified in accordance with legal procedure applicable to the Kingdom's representations abroad. 3. If a legal person incorporated outside the Kingdom, the shareholder may send the company a proxy form signed by the representative thereof and duly certified in accordance with legal procedure applicable to the Kingdom's representations abroad. 4. The authentication requirement referred to in paragraphs (2) and (3) of this Article does not apply to documents and papers exempted from authentication when under relevant international agreements. Article 29: Attendance and Delegation of Authority 1. A shareholder may authorize another person to attend a general or special assembly meeting on their behalf through means of technology. 2. A shareholder may not attend the company's general or special assembly meeting and concurrently authorize another person to attend by any means. Article 30: Providing the Company with the Proxy Form and Power of Attorney The shareholder or proxy thereof shall provide the company with a copy of the proxy form or power of attorney at least two days prior to the assembly meeting date, and the proxy shall present the proxy form or power of attorney before the meeting. The company shall accept proxy forms or powers of attorney if provided therewith before the end of the procedures for registering shareholders in general or special assemblies. Article 31: Providing the Ministry with the Board of Directors' Report on the Company's Activity The chairman of the company's board of directors shall provide the Ministry with the board's report on the company's activity at least 21 days prior to the date set for the annual general assembly meeting. Article 32: Distribution of Dividend to Shareholders The board of directors of a joint-stock company shall implement the decision of the general assembly regarding the distribution of dividends to registered shareholders within a period not exceeding 15 days from the date of entitlement to said dividends as specified in the decision of the assembly or the board of directors' decision to distribute interim dividends, as the case may be. Article 33: Nominal Value of Shares Shares may not be issued for less than their nominal value. However, they may be issued for more than their nominal value if provided for in the company's articles of association or if approved by the extraordinary +966 11 294 4444 | Riyadh 11162 ارباح Kingdom of Saudi Arabia | المملكه العربيه السعوديه @ SaudiMCI www.mci.gov.sa 11 [Non-Text] وزاره التجاره Ministry of Commerce VISION and 230 الولاده العربيه السعوديه KINGDOM OF SAUDI ARABIA general assembly; in such case, the difference in value shall be added in a separate item as part of the shareholders' rights, which may not be distributed as cash dividends, but may be used to increase the capital through the issuance of bonus shares, or to extinguish losses after exhausting any reserves previously formed from profits. Chapter 3: Company's Purchase of its Shares Article 34: Rules Governing the Company's Purchase of its Shares If so permitted in its articles of association, a company may purchase its Ordinary or Preferred Shares, in accordance with the following rules: (a) The purpose of the share purchase shall be to either reduce the company's capital or to retain the shares as Treasury Shares. (b) The percentage of Treasury Shares shall not, at any time, exceed 10% of the total class of company shares being purchased. (c) The value of shares subject to purchase shall be paid in full. (d) The Treasury Shares' debit balance shall not exceed the Retained Earnings' balance. Article 35: Company's Purchase of its Shares The company shall purchase its shares by virtue of a decision issued by the extraordinary general assembly approving said purchase while setting a maximum limit for the number of shares subject to purchase and the purpose therefor. The decision shall include authorizing the board of directors to complete the purchase in one or several stages within a maximum period of 12 months from the date of approval, provided that the company announces said approval and the conditions thereof immediately upon issuance. The extraordinary general assembly may at any time decide to change the purpose of the purchase. Article 36: Treasury Share Usage A company may not purchase its shares to be used as Treasury Shares except to: (a) Fulfill the rights holders of debt Instruments or financing sukuk that are convertible into shares in accordance with the terms and conditions of said instruments or sukuk. (b) Swaps for the acquisition of shares or interests or the purchase of assets. (c) Allocation to company employees as part of employee share ownership plans. (d) Cancellation of shares in accordance with capital reduction provisions. (e) Any other purpose determined by the company and approved by the Ministry. Article 37: Providing Information to Shareholders The company shall provide sufficient information to shareholders about the share purchase offer and duration thereof, and shall give them a fair opportunity to offer their shares for purchase. Article 38: Effects of a Preferred Share Purchase Preferred Shares shall be canceled upon completion of the company's purchase thereof, the company is obliged to take all necessary legal measures to reduce the capital. +966 11 294 4444 | Riyadh 11162 Kingdom of Saudi Arabia | المملكه العربيه السعوديه SaudiMCI www.mci.gov.sa 12 [Non-Text] وزاره التجاره Ministry of Commerce VISION 230 المركبه العربيه السعوديه KINGDOM OF SAUDI ARABIA Article 39: Duration of Retention and Disposal of Treasury Shares In its decision approving the company's share purchase, the extraordinary general assembly shall specify the period during which the company may retain the Treasury Shares and the effect of the expiration of said period without disposing of the shares. Article 40: Increasing the Company's Capital through Preemptive Rights Unless the Treasury Shares are allocated to the employee share ownership plan, the company may not increase its issued capital through preemptive rights if it retains Treasury Shares or if the extraordinary general assembly approved the company's share purchase and did not revoke said approval. Article 41: Increasing the Company's Capital through Capitalization In the event that the company's capital is increased through capitalization, then Treasury Shares shall have the same rights as other shares. Article 42: Employee Shares If the purpose of a company's share purchase is to allocate Employees' Shares as part of the employee share ownership plan, then the company's share purchase rules stipulated herein shall be taken into account, in addition to the following: (a) The company's articles of association shall stipulate that shares may be allocated to employees. (b) The extraordinary general assembly's approval of the employee share ownership plan, and said assembly tasking the board of directors with setting the provisions of said plan, including the allocation price for each share offered to employees if offered for consideration. (c) Excluding non-executive board members from the employee share ownership plan. (d) Executive board members not participating in voting on the decisions of the board of directors related to the employee share ownership plan. Article 43: Rules of the Company's Sale of its Treasury Shares By virtue of a board decision, Treasury Shares may be sold in one or several transactions, taking into account the following: (a) That the company's articles of association so permit. (b) That the board decision does not conflict with the decision of the extraordinary general assembly approving the purchase of said shares. Article 44: Preemptive Rights Pertaining to Treasury Shares At the time of issuance of the board's decision to sell the Treasury Shares in return for a cash consideration, company shareholders shall, within the period specified in the decision, have preemptive rights in proportion to their shareholding in the company's total issued capital. Article 45: Rules for the Company Accepting its Shares as Pledges A company may accept its shares as pledges in accordance with the following Rules: (a) The company's articles of association so permit. (b) The pledge is made to guarantee a debt owed to the company. +966 11 294 4444 | Riyadh 11162 لاباش Kingdom of Saudi Arabia | المملكه العربيه السعوديه SaudiMCI www.mci.gov.sa 13 [Non-Text] وزاره التجاره Ministry of Commerce VISION 30 الجماعه العربيه السعوديه KINGDOM OF SAUDI ARABIA (c) The pledge shall be in the interest of the company and shareholders, at the discretion of the board of directors. (d) Ordinary general assembly approval of the pledge. Prior approval may be obtained for more than one transaction. Chapter 4: Share Pledge Rules Article 46: Rules for Shareholders Pledging their Shares A company shareholder may pledge shares held thereby in accordance with the following rules: (a) Obtaining the necessary regulatory approvals, if any. (b) The share pledge agreement between the pledger shareholder and pledgee creditor fulfills the terms and rules set forth in this Chapter. Article 47: Accepting Share Pledges Without prejudice to relevant laws and regulations, shares may be pledged to those who have the right to own or possess them for the benefit of another person, in accordance with the terms and rules set forth in this Chapter. Article 48: Pledge Agreement Data A share pledge is established by virtue of a written agreement that includes the following data: (a) The name of the pledger shareholder, the name of the pledgee, their ID numbers and addresses. (b) The number of pledged shares, value and serial numbers thereof, as well as the name of the issuing company and commercial registration number thereof. (c) The amount of debt secured by the pledge, and the maximum limit thereof, if any. (d) The name of the debtor (if other than the pledger), ID number and address thereof. (e) The date of the pledge agreement. (f) Pledge redemption terms and conditions. (g) Any other conditions agreed upon by the parties. Article 49: Rules for Registering and Releasing the Pledge Registering and releasing a share pledge shall be in accordance with the following: (a) The pledgee and pledger shareholder shall submit the pledge application to the Chairman of the board of directors if the company is the body that prepares and maintains the Shareholders Register, or to the representative of the party contracted with to prepare and maintain said register, provided that the signature of the applicant is attested by the Chamber of Commerce, or a licensed bank, or a CMA Authorized Person, or a notary, or a person authorized to engage in notarial work, or is duly certified in accordance with legal procedure applicable to the Kingdom's representations abroad if the pledgee or pledger shareholder reside outside the Kingdom or are legal persons established outside the Kingdom, according to Form No. (2) and Form No. (3) annexed hereto. (b) The pledge shall be recorded in the Shareholders Register, and the certificates of the pledged shares shall be annotated indicating the pledging thereof and the name of the pledgee. +966 11 294 4444 | Riyadh 11162 الرياض Kingdom of Saudi Arabia | المملكه العربيه السعوديه @ SaudiMCI www.mci.gov.sa 14 [Non-Text] وزاره التجاره Ministry of Commerce VISION and 230 ال Estimates المطاقه KINGDOM OF SAUDI ARABIA (c) The pledge shall be released upon the expiry of its term, if any, or by virtue of a request for the redemption of a pledge according to Form No. (4) annexed hereto, directed by the pledgee to the Chairman of the board of directors if the company is the body that prepares and maintains the Shareholders Register, or to the representative of the party contracted with to prepare and maintain said register, indicating the consent thereof to release the shares pledged thereto, provided that the signature of the applicant of the form is duly certified by one of the entities or persons defined in paragraph (a) of this Article. (d) The authentication requirement referred to in paragraphs (a) and (c) of this Article shall not apply to documents and papers exempted from authentication under relevant international agreements. Article 50: Effectiveness of the Pledge The pledge shall not be effective vis-à-vis third parties until it is registered in the Shareholder Register. Chapter 5: Rules for the Issuance and Conversion of Shares Article 51: Rules for the Issuance of Shares 1. The company may issue Preferred or Redeemable Shares, including classes that grant various rights or privileges, or place restrictions on some of these classes, taking into consideration the following rules: (a) That the company's articles of association so permit. (b) That the issued capital has been paid in full. (c) Obtaining the approval of a special assembly formed in accordance with Article 89 of the Law and composed of the holders of shares or classes thereof affected by said issue, and the approval of the extraordinary general assembly. (d) That a proposal to issue classes and types of shares be attached to the invitation for the convening of the extraordinary general assembly, and provided that said proposal includes the rights, privileges, or restrictions on the classes or types of shares proposed to be issued. (e) That the company's articles of association address the rights, privileges, or restrictions on the classes or types of shares to be issued. (f) The total percentage of issued Preferred Shares or Redeemable Shares and their classes shall not, at any time, exceed 50% of the company's capital. (g) The value of Preferred Shares or Redeemable Shares shall be fully paid-up upon subscription. 2. The decision of the extraordinary general assembly must include the terms and provisions for redeeming the Redeemable Shares, provided that said provisions include the company's option to redeem them. Redeemed shares shall be deemed canceled as soon as the company redeems them, with the prescribed legal measures taken to reduce the capital as stipulated in the Law, without prejudice to the provision of Article 59 thereof. Article 52: Rules for the Conversion of Share Classes and Types 1. Subject to the provisions of Article 109 of the Law, the conversion of one class or type of shares to another class or type shall be in accordance with the following rules: (a) That the company's articles of association so permit. (b) That the conversion relates to any class or type of shares stipulated in Article 108 of the Law, and that the conversion relates to a class or type of shares that constituted the pre-conversion capital. +966 11 294 4444 | Riyadh 11162 alh YouTube | SaudiMCI 15 Kingdom of Saudi Arabia | المملكه العربيه السعوديه [Non-Text] وزاره التجاره Ministry of Commerce VISION and 230 الولاده العربيه السعوديه KINGDOM OF SAUDI ARABIA (c) Obtaining the approval of a special assembly formed in accordance with Article 89 of the Law and composed of the holders of shares or classes of shares detrimentally affected by said conversion or when the conversion infringes upon the rights thereof, and the approval of the extraordinary general assembly. (d) The total percentage of Preferred or Redeemable Shares, if any, shall not exceed 50% of the company's post-conversion capital. (e) The board of directors shall submit a statement on the conversion of shares to the extraordinary general assembly, which shall include the manner by which the conversion percentage was calculated and the extent of its impact on the rights of shareholders holding the class or type of shares to be converted and the impact thereof on the rights of other shareholders. Article 53: Preferred and Redeemable Share Rights 1. Preferred or Redeemable Shares may be granted preferential rights over ordinary shares, but may not be given the right to vote in general assemblies of shareholders. 2. If the terms and conditions for the issuance of Preferred or Redeemable Shares provide for the right to obtain an annual fixed percentage of the company's annual profits, or to obtain a percentage of net profits higher than that received by owners of ordinary shares, and the company has sufficient annual profits to meet the prescribed percentage and did not allocate the same to owners of Preferred or Redeemable shares for a period of three consecutive years, then the special assembly of owners of this class of Preferred or Redeemable Shares, convened in accordance with the provisions of Article 89 of the Law, may resolve to allow them to attend the meetings of the company's general assembly and participate in voting with each Preferred or Redeemable Share carrying one vote, until the company is able to pay the dividends allocated to the owners of such shares for previous years. Article 54: Rules for Dividing and Merging Shares Subject to the provisions of Article 103 of the Law; the division of shares into shares of a lower nominal value, or merge them to become shares of a higher nominal value shall be in accordance with the following rules: (a) That the company's articles of association permit the division or merging of shares. (b) The company's board of directors shall prepare a share division or share merge proposal, which shall include the reasons for such a share division or share merge, the effect thereof on shareholders, and the percentage to which each shareholder is entitled subsequent to the share division or share merge; which proposal shall be presented to shareholders at least 21 days before the date set for convening the extraordinary general assembly. (c) Obtaining the approval of the extraordinary general assembly on the share division or share merge. Chapter 6: Selling Shares at Public Auction Article 55: Rules for Selling Shares at Public Auction The company shareholder shall pay the share value balance within a period not exceeding 30 days from the date of the board of directors' request addressed thereto by any of the means prescribed in the company's articles of association or by registered letter or by any means of technology, otherwise the board of directors may sell such shares at public auction as follows: (a) Notifying the shareholder by any of the means referred to in this Article. +966 11 294 4444 | Riyadh 11162 لارياض SaudiMCI 16 Kingdom of Saudi Arabia | المملكه العربيه السعوديه www.mci.gov.sa [Non-Text] وزاره التجاره Ministry of Commerce VISION 30 الجمهوريه العربيه السعوديه KINGDOM OF SAUDI ARABIA (b) The board of directors shall inform the Ministry of its desire to sell at public auction the shares whose value was not paid up in full. (c) Payment must be made during the auction sale process by one of the following means: (1) Cash. (2) Cashier's Check. (3) Any other banking method. (d) The company shall announce the place, date and time of the auction no more than 30 days and no less than 15 days from the date set therefor in one or more daily newspapers or by any other means specified by the Ministry, with the cost of announcement included in auction expenses. (e) It is prohibited to influence or mislead auction prices through marketing and advertisements. (f) The company shall issue a report stating auction procedures, the name of the awardee, and the winning bid. Article 56: The Company Collecting Amounts Due Thereto The company shall, from the sale proceeds, collect amounts due thereto, including auction expenses; and shall return the remainder to the share owner. If the sale proceeds are not sufficient to satisfy said amounts, the company may cover the balance from all of the shareholder's property. Chapter 7: Issuance and Sale of Preemptive Rights Resulting from Capital Increase Article 57: Acquiring Preemptive Rights Subject to the provisions of Articles 127 and 129 of the Law, and after issuance of the extraordinary general assembly's decision approving increasing the company's issued capital, or the board of directors' decision approving its increase within the limits of the authorized capital by issuing new shares in exchange for cash shares, each Registered Shareholder shall be granted preemptive rights in proportion to the shares owned thereby in the capital of the company at the end of the day upon which said assembly was convened, taking into account the class and type of share held thereby. Registered Shareholders may not exercise preemptive rights when the company issues Employees' Shares, or if the extraordinary general assembly decides to suspend the preemptive rights of shareholders in subscribing to an increase in the issued capital in exchange for cash shares or granting them to others in cases that it deems to be in the interest of the company. Article 58: Exercising Preemptive Rights 1. Preemptive right holders shall be entitled to subscribe to the new shares to be issued upon issuance of the extraordinary general assembly decision approving the issued capital increase, or the board of directors' decision approving its increase within the limits of the authorized capital. 2. Preemptive right holders shall have the right to subscribe to one new share at the price determined by the extraordinary general assembly, or the board of directors' decision approving its increase within the limits of the authorized capital. Article 59: The Sale or Assignment of Preemptive Rights Subject to the provisions of the company's articles of association, Registered Shareholders shall have the right to sell or assign to others, whether company shareholders or third parties, and at the price and conditions agreed upon, all or some of the preemptive rights held thereby, during the subscription period for new shares as determined in the decision to increase the capital by issuing new shares in exchange for cash shares; provided that said period shall not be less than 15 days. +966 11 294 4444 | Riyadh 11162 ارباح Kingdom of Saudi Arabia | المملكه العربيه السعوديه @ SaudiMCI www.mci.gov.sa 17 [Non-Text] وزاره التجاره Ministry of Commerce VISION and 230 المملكه العربيه السعوديه KINGDOM OF SAUDI ARABIA Article 60: Disclosing the Assignment of Preemptive Rights A Registered Shareholder who sells or assigns all or some of their preemptive rights to a third party shall notify the company in writing of such sale or assignment, and provide it with the name, nationality, place of residence and profession of the purchaser or assignee, as well as the number of sold or assigned rights. Said person replaces the selling or assigning shareholder in exercising the right to subscribe to the new shares to the extent granted under the purchased or assigned preemptive rights. Article 61: Loss of Preemptive Rights Preemptive right holders, whether Registered Shareholder or the purchaser or assignee of said rights in Article 59 of the Regulations, shall be deemed to have lost their right to subscribe to the new shares issued in exchange of cash shares if they fail to exercise said right by the end of the last subscription period day. Part 3: Limited Liability Companies Chapter 1: Company Management Article 62: Delegating Company Managers based on the Partners' Authorization 1. The provisions governing joint-stock company board member authorization with regard transactions and contracts in which the member has a direct or indirect interest and competing activities shall apply to the board of managers of a limited liability company, unless otherwise stipulated in its article of incorporation. 2. If the company's articles of incorporation so stipulate, the interested manager may participate in deliberations and vote on decisions related to competing activities or business and contracts in which he has a direct or indirect interest. Article 63: Quorum Required to Remove the Company's Manager Subject to the provisions of the company's articles of incorporation, the decision to remove the manager of a limited liability company, even if a partner therein appointed by virtue of its articles of incorporation or a separate contract, shall require the prescribed quorum for the validity of partner decisions as stipulated in the Law. Chapter 2: The Company's Capital Article 64: Increasing the Capital 1. Upon increasing the capital of the company by issuing new interests, all partners shall have the right to acquire increase interests in proportion to their contribution in the company's capital. If such subscription for new interests is less than the percentage to which the partner is entitled, then other partners may subscribe for the remaining interests in proportion to the respective number of interests held thereby. 2. Partners shall submit a draft amendment of the company's articles of incorporation, including increasing the company's capital, and an acknowledgment submitted to the Commercial Register regarding fulfillment of the value of new interests, the increase decision becomes effective after its registration and publication in this Register. Article 65: Providing the Ministry with a Report on the Company's Activity The company's manager shall provide the Ministry with a report on the company's activity at least 21 days prior to the date set for the annual general assembly meeting. +966 11 294 4444 | Riyadh 11162 لارياض Kingdom of Saudi Arabia | المملكه العربيه السعوديه f@SaudiMCI www.mci.gov.sa 18 [Non-Text] وزاره التجاره Ministry of Commerce VISION لبنان 230 المملكه العربيه السعوديه KINGDOM OF SAUDI ARABIA Chapter 3: Purchasing, Pledging and Accepting Interest Pledges Article 66: Rules for a Company Purchasing its Interests A limited liability company may purchase its interests if its articles of incorporation so stipulate, provided that partner approval is granted for the company to purchase such interests, and waiver of their right to redeem them, while authorizing the company's manager to complete the purchase within a maximum period of 30 days from the date of the partners' approval, unless the articles of incorporation provide for a longer period. Article 67: Rules for the Company Accepting its Interests as Pledges A company may accept its interests as pledges in accordance with the following rules: (a) The company's articles of incorporation so permit. (b) The pledge is made to guarantee a debt owed to the company. (c) The pledge shall be in the interest of the company and partners. (d) Partner approval of the pledge in accordance with the quorum prescribed for amending the company's articles of incorporation. Prior approval may be obtained for more than one transaction. Article 68: Partners Pledging their Interests A company partner may pledge interests held thereby in accordance with the following rules: (a) Obtaining the necessary regulatory approvals for pledging, if any. (b) The interest pledge agreement between the pledger partner and pledgee creditor fulfills the terms and rules set forth in this Chapter. Article 69: Pledge Agreement Data An interest pledge is established by virtue of a written agreement that includes the following data: (a) The name of the pledger partner, the name of the pledgee, their ID numbers and addresses. (b) The number of pledged interests, value thereof, and commercial registration number of the company. (c) The amount of debt secured by the pledge, and the maximum limit thereof, if any. (d) Name, ID number and address of the debtor, if other than the pledger. (e) The date of the pledge agreement. (f) Pledge redemption terms and conditions. (g) Any other conditions agreed upon by the parties. Part 4: Non-Profit Companies Article 70: Public Non-Profit Company Areas of Spending: Public non-profit areas of spending to be stipulated in the articles of association of Public Non-Profit Companies shall include the following: (a) Religious activities. (b) Education, training, research and related fields. +966 11 294 4444 | Riyadh 11162 Kingdom of Saudi Arabia | المملكه العربيه السعوديه SaudiMCI www.mci.gov.sa 19 [Non-Text] وزاره التجاره Ministry of Commerce VISION ل.ر 230 المركبه العربيه السعوديه KINGDOM OF SAUDI ARABIA (c) Health and psychological matters, nursing and treatment of patients, as well as related services. (d) Family and child care programs. (e) Supporting vocational, health, social, psychological and academic rehabilitation programs. (f) Literature, culture, arts, talents, hobbies and activities. (g) Heritage, tourism, entertainment and related activities. (h) Supporting and sponsoring crafts and professions of all kinds. (i) Sports activities. (j) Providing legal services to serve the community. (k) Supporting and sponsoring citizenship programs and social and economic development. (1) Supporting programs to provide housing for groups within the community. (m) Programs to combat poverty and provide aid to those entitled thereto. (n) Income support and maintenance. (o) Information technology, data and artificial intelligence activities. (p) Protecting the environment and wildlife. (q) Sponsoring entrepreneurship, small and medium enterprise, as well as consumer protection programs. (r) Establishing, operating or maintaining hospitals and medical centers. (s) Supporting and enabling social investment and volunteer work. (t) Any other public non-profit areas of spending specified by the Ministry in coordination with the National Center for Non-Profit Sector. Article 71: Provisions Relating to Categories of Membership in Non-profit Companies Each interest or share in a non-profit company's capital shall have one vote in the meetings of the partners, shareholders or the general assembly. However, the articles of incorporation or articles of association of a non-profit company may stipulate defining categories of membership that grant rights or privileges, or place restrictions on any of these categories, without prejudice to the provisions of Articles 188 and 189 of the Law. Article 72: The Use of Profits for Maximizing the Investments and Expanding the Business The articles of incorporation or articles of association of a non-profit company may stipulate that a certain percentage of profits be allocated to maximize its investments or expand its operations, provided that said percentage does not exceed 30% of profits, unless the articles of incorpora …(32,637 more chars)