Saudi AGM Compliance Made Easy: Strategies You Need to Achieve Governance Success and Triumph

Saudi Arabia’s Companies Law sets clear expectations for Annual General Meetings (AGMs) to ensure transparency and accountability. For Limited Liability Companies (LLCs), these meetings are a cornerstone of corporate governance, enabling partners to make crucial decisions. Let’s explore the legal framework, deadlines, and procedures for AGMs in the Kingdom.

When Must AGMs Be Held?

An LLC must hold its AGM at least once a year, within six months after the fiscal year ends. For instance, if the fiscal year concludes on December 31, the AGM must occur by June 30 of the following year.

Important Note: Saudi law does not provide provisions for postponing the AGM. Missing the deadline may lead to late filing of financial statements and associated legal consequences.

How Is the AGM Called?

Managers are typically authorized to call the AGM, as outlined in the company’s articles of incorporation. However, the meeting can also be convened:

• At the request of managers, the auditor, or one or more partners representing at least 10% of the capital.
• Notices must be sent to all partners at least 21 days before the meeting via registered mail, technology, or any method specified in the company’s articles.

Important Note: Partners representing 100% of the company’s capital may hold the AGM without adhering to notice requirements if all are in agreement.

What Are the Methods for Conducting the AGM?

Saudi Companies Law offers flexibility in how AGMs can be conducted:

• Physical Meeting: Partners gather in person to deliberate and vote.
• Virtual Meeting: Meetings can occur through video conferencing or other technologies, allowing partners to participate remotely.
• Written Consultation: Decisions may be circulated for written approval without convening a meeting.

Important Note: All deliberations and decisions, whether made during a meeting or through circulation, must be recorded in minutes and entered into a special register maintained by the company.

What Is the Quorum and Voting Process?

• Quorum Requirements: For the first call, decisions are valid if approved by partners representing more than 50% of the capital. If this is not achieved, a second meeting is called, where decisions require a majority of the interests represented, regardless of their percentage in the capital.
• Voting Rights: Each partner’s voting power corresponds to their ownership percentage unless otherwise specified in the articles of incorporation.

Important Note: Amendments to the articles of incorporation, such as capital changes, require approval from partners representing at least 75% of the capital.

What Are the Typical Agenda Items?

AGMs typically address:

1. Reviewing the manager’s report on the company’s activities and financial position.
2. Discussing financial statements for the fiscal year.
3. Evaluating the auditor’s report and deciding on dividend distributions.

Partners may propose additional agenda items. If the manager refuses to include a proposed item, the partner can escalate the matter to the assembly.

Why Is Compliance Crucial?

Failure to hold AGMs or file required documents on time can lead to penalties:

• Fines of up to SAR 500,000 for neglecting accounting records, filing, or obstructing AGMs.
• Imprisonment of up to one year for unlawful dividend distribution, false records, or obstructing access to company documents.

Important Note: Repeat violations within three years can result in doubled penalties.

Want to simplify AGM management? 

Klea offers tailored solutions to streamline compliance and empower your business. Book a demo today and unlock smarter corporate governance. For more insights into processes in other jurisdictions, explore our article, Unlock Key Insights for AGM Success: The South Korean Way.