FICHA DE OBSERVACIÓN DOCUMENTAL N°

The Capital Market Authority has issued the Corporate Governance Regulations as well as many other regulations in order to organise the conduct of listed companies; these aim to protect the rights of shareholders and stakeholders as well as to create a healthier environment for investment. There are more than a dozen regulations, such as the Listing Rules, the Resolution of Securities Disputes Proceedings Regulations, Merger and Acquisition Regulations, Investment Funds Regulations, Securities Business Regulations, Market Conduct Regulations, Offers of Securities Regulations, Credit Rating Agencies Regulations, Investment Accounts Instructions, Procedures and instructions for companies whose losses have reached 50% of their capital.288 Some of these regulations and their annexes of applications and forms are very useful for the board of directors in raising their awareness about discharging their duties perfectly. They may also guide them in dealing with some crucial situations which may help them to tackle problems and avoid prosecutions in the first place.

The first Corporate Governance Regulations was issued in 2006 with 5 sections and 19 articles that highlight the rules and standards required to ensure compliance of joint stock companies with best governance practices.289 _{This regulation comes under the}

286 _{The description of the UK Companies Act 2006, the National Archives of the UK government,}

available at http://www.legislation.gov.uk/ukpga/2006/46/notes) , accessed on 18/8/2016.

287 _{See the Introductory text of Company Directors Disqualification Act 1986.}

288 _{To look at all those regulations, see the official website of the Capital Market Authority available at}

http://www.cma.org.sa/en/Regulations/Pages/default.aspx) , accessed on 18/8/2016.

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approach of "comply or explain" for all listed companies; this means that "a company must disclose in the board of directors' report, the provisions that have been implemented and the provisions that have not been implemented as well as the reasons for not implementing them".290 However, over time many decrees have been issued which have forced listed companies to follow certain rules; several of these compulsory rules were inserted in the new Company Law 2015.291

On the 13th of February 2017, the Capital Market Authority in Saudi Arabia issued a new Corporate Governance Regulation (CGR) which superseded the previous regulation issued in 2006. The new regulation has changed many provisions, tackled numerous shortcomings and provided copious details. The main characteristics and key differences of the new CGR can be summarised as follows:

- The new CGR aims to provide some details to explain the provisions of the new Saudi Law of Companies issued on the 4th of December 2015, as the old CGR was not in harmony with it and conflicted with some of its provisions.292 - Unlike the previous CGR, which comes under the approach of "comply or

explain" for all listed companies,293 the articles of the new CGR, except a few guidance rules, are compulsory for all listed companies.294

- The number of parts and rules in the new CGR is greater than the number in the old one. There are twelve parts in the new CGR, containing 98 articles with copious details, compared to just 5 parts, including 19 articles, in the old one. - The new CGR provides some forms and schedules for disclosing remunerations

and obliges listed companies to prepare their remuneration documents accordingly.295

290 _{Article 1/c of the Corporate Governance Regulations 2006 in the Kingdom of Saudi Arabia. There}

are more than 8 articles in Saudi CGR became mandatory on all listed companies.

291 _{There are more than 8 articles in Saudi CGR became mandatory for all listed companies by different}

decrees, see the footnotes of the Corporate Governance Regulations 2006.

292 _{Many of these relevant new provisions will be discussed in the chapter four and five of this thesis.} 293 _{Article 1/c of the Corporate Governance Regulations 2006 in the Kingdom of Saudi Arabia. There}

are some articles of old CGR have become mandatory by different decrees from the Capital Market Authority.

294 _{Article 1/c of the Corporate Governance Regulations 2017 in the Kingdom of Saudi Arabia. According}

to Resolution number 8-16-2017 dated 13 February 2017, all provisions of the new CGR entered into force on 22 April 2017 except for a small number which entered into force on 31 December 2017. This means that all parts have now been implemented except some guidance articles which are not mandatory.

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This thesis will deal with all of the relevant changes and shortcomings considered in the new regulation. It also clarifies the extent of the improvement in corporate governance that could result from the new regulation and those aspects related to the thesis that require further reform.

The regulations of listed joint stock companies and the capital market rules can be found also in England. There are, for example, the Rules of the London Stock Exchange and the requirements of the United Kingdom Listing Authority which regulate the operation of the trading system. In addition, there are the UK Corporate Governance and Stewardship Codes and UK standards for accounting, auditing and actuarial work which have been set by the Financial Reporting Council.296

This thesis will review the relevant Saudi rules that are related to the board of directors in the light of those in England and global standards of corporate governance.

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3.3 The Economic Environment in Saudi Arabia Affecting Corporate