RIYADH: Saudi Arabia’s markets regulator has proposed giving shareholders more power over listed companies, from demanding in-person assemblies to pushing loss-making firms to publish recovery plans.
It is the latest in a series of measures by the Capital Market Authority to tighten governance at listed companies, following its April approval of new rules for removing board members.
The changes would apply to a market of considerable size. Market capitalization stood at SR9.12 trillion ($2.43 trillion) at the end of the first nine months of 2026, with the total number of transactions executed hitting 79.47 million.
The draft proposal says the project aims to “enhance the participation of shareholders in decisions related to the companies in which they invest,” alongside higher levels of transparency and accountability.
Speaking to Arab News, economist Talat Hafiz said that the changes could strengthen investor confidence by improving transparency, protecting shareholder rights and making boards more accountable.
He added: “This could help attract more foreign and institutional investment and reduce the extra return investors demand to compensate for governance risks.”
In-person meetings and a louder voice
One of the key tenets of the proposal involves allowing shareholders holding at least 5 percent of a company’s voting shares to request the general assembly be held in person, alongside remote access.
The request would have to be made within five days of the meeting notice, and the board would be obliged to comply. The CMA could also order companies to hold in-person assemblies whenever it sees fit.
Hafiz believes the 5 percent threshold is a reasonable starting point, saying: “It represents a meaningful economic interest and gives shareholders a practical way to raise concerns and hold boards accountable.”
Shareholders holding 10 percent or more could ask for items to be added to the agenda within five working days of the invitation.
All shareholders could submit questions within five days of the notice, and boards would have to give them a separate agenda item with enough time to answer.
Companies would also have to record every question and answer and publish the proceedings on their websites within 10 working days.
However, he said any impact on share prices is likely to be gradual and vary between companies.
Tougher rules for companies in the red
The draft reserves its firmest measures for companies whose accumulated losses reach 50 percent or more of capital.
They would have to hold hybrid assemblies until losses fall below 20 percent. The threshold for shareholders to add agenda items would drop from 10 percent to 5 percent.
Question rules would become mandatory for these companies, and shareholders could raise any topic, not only agenda items.
Answers to questions unrelated to the agenda would have to be announced on Tadawul within five working days. Board members’ remuneration would also go to the assembly for approval.
Such companies would have to disclose on Tadawul the names and holdings of shareholders owning 1 percent or more, or of the top 20 shareholders, whichever list is longer.
“Better disclosure will also help investors distinguish between stronger and weaker companies and make more informed investment decisions,” Hafiz said.
Shareholders with 5 percent could also put a resolution on the agenda tasking the board with preparing a recovery plan.
It would set out the root causes of the losses, the steps to be taken, measurable targets and a timeline.
The board would publish the plan on Tadawul within 60 days of the assembly’s decision.
Boards would then issue monthly or quarterly progress reports within five days of each period’s end.
These would compare results with targets, explain any deviation and the response, and justify changes to the plan.
The requirements would continue until losses fall below 20 percent.
“For companies with heavy losses, recovery plans with measurable targets and regular progress reports could have the biggest immediate effect. They would give shareholders a clear basis for assessing performance and questioning delays or missed targets,” the economist added.
Scrutiny of related-party deals
The draft widens the definition of related parties to include major shareholders, board members and senior executives.
It also covers those of subsidiaries and of major shareholders, their relatives, and companies they control, while wholly owned subsidiaries would be excluded.
Audit committees would have to review related-party transactions, check that no preferential pricing is involved, and advise the board on whether terms are fair and serve the company’s interest.
Boards would then make the final decision, confirm fairness, and make supporting documents available to shareholders.
Nominations and audit committees
The draft would make it mandatory for main market companies to set objective board nomination criteria, tailored to their size and complexity, that do not restrict competition without justification.
Nomination committees would have to document why they reject a candidate and could not turn away anyone who meets the criteria.
Audit committee chairs would have to be independent, and committee members from outside the board would fall under the same conflict-of-interest rules as directors.
“The clearest signs of success would be better cash flow, sustainable improvements in profitability and timely corrective action when targets are missed. Producing more reports alone would not be enough; shareholders need to see improvements in the business,” Hafiz said.
The Capital Market Authority has opened a 30-day public consultation on the draft, which closes on Nov. 28.
