Chapter One: Incorporation
A Saudi stock company named the “Saudi Stock Exchange (Tadawul)” shall be incorporated in accordance with these Bylaws and the provisions of the Capital Market Law and the Companies Law with its legal personality and financial independence. It shall be referred to hereinafter as “The Company”.
The head office of the company is located in Riyadh in the Kingdom of Saudi Arabia. The Company may establish branches or other offices within or outside the Kingdom.
Article (3): Purpose of the Company:
The purposes of The Company include provision, furnishing and management of the mechanisms of securities’ trading, settlement and clearance, securities’ deposit and registration of ownership thereof and dissemination of information relating thereto. The Company may engage in any other activities relating to the foregoing in order to meet its objectives as specified in the Capital Market Law.
The life cycle of The Company is ninety-nine (99) years starting from the date of issuance of the Royal Decree authorizing the incorporation of The Company. This term may be extended for a similar period or other longer or shorter periods pursuant to a resolution by the Extraordinary General Assembly, at least one year before its expiry date.
The Company may establish, either solely or jointly with other Saudi or foreign companies, other companies to conduct activities that supplement The Company’s activities or otherwise help it achieve its purposes. The Company may purchase such companies, partially or wholly. The Company may own, purchase, sell or lease movable and immovable assets for the purpose of achieving its objectives.
Chapter Two: Capital and Shares
The capital of The Company is SAR1,200,000,000 (one billion and two hundred million Saudi Riyals) divided into 120,000,000 (one hundred and twenty million) shares of equal value and each of which with a nominal value of SAR10 (ten Saudi Riyals), all of which are cash shares subscribed thereto by the Public Investment Fund.
Part of The Company’s shares shall be offered to the public at the time determined by the Extraordinary General Assembly.
The value of the share shall be paid up on time in the manner proposed by the Board of Directors. The shareholder shall be responsible before The Company for paying up the value of the shares thereof. Should the shareholder fail to pay up the remaining amount of the share value on time, the Board of Directors may auction off his shares after serving him a notification by a registered mail to the address shown in the Shareholders Record. However, the defaulting shareholder may still pay the remaining outstanding value of the share, in addition to any expenses incurred by The Company, until such auction date. The Company shall collect the amounts due thereto from the shares’ sale proceeds, and return any remaining amounts to the shareholder. Should the sale proceeds be insufficient, The Company may collect the remaining due amount from any funds of the shareholder. In this event, the sold share shall be cancelled and the purchaser shall be given a new share bearing the number of the cancelled share, provided that the same shall be marked in the Shareholders Record.
All Company's shares shall be nominal and ordinary. Under a resolution of the Extraordinary General Assembly, and after the relevant statutory requirements are met, The Company may issue preferred shares convertible to common or redeemable shares; and may issue tradable and non-split bonds or sukuk, provided that such a resolution defines the values and requirements of these bonds or sukuk, and whether they are convertible to shares. The Assembly may delegate this power to the Board of Directors.
The Company reserves the right to issue shares with a value higher than the nominal value provided however that the difference of value shall be added to the statutory reserve even if it reaches its ceiling limit.
Subscription in and holding of shares means that the shareholder accepts The Company’s Bylaws and binds himself to the decisions issued by the shareholders assemblies in accordance with the provisions of these Bylaws, whether the shareholder is present or absent, and whether it agrees to such decisions or not.
The share is indivisible in the face of The Company. If multiple persons own the share, they should assign one of them to represent thereof in exercising the rights of the share and they shall be jointly responsible for the obligations arising from the share ownership.
After verification of the economic feasibility and obtaining the approval of the Capital Market Authority, the Extraordinary General Assembly may decide to increase The Company's capital once or several times through the issuance of new shares at the same nominal value of the original shares, provided the original capital has been paid in full; and with due consideration to the Companies Law and the Capital Market Law. The decision shall define the amount and method of increasing the capital. Shareholders shall have priority to subscribe in the new cash shares; and such Shareholders’ having priority shall be notified of the decision to increase the capital and the subscription conditions through publishing in a daily newspaper. Each shareholder shall demonstrate his/her interest in using the priority right within fifteen days from the date of publishing the capital increase decision. These shares shall be distributed to the original shareholders who have applied to subscribe in proportion to their original shareholding, provided that a shareholder does not acquire a number of shares that exceeds what he has requested. The remaining new shares shall be distributed to the original shareholders who requested more new shares than their original holdings entitlement, provided that the number of new shares they acquire does not exceed what they have requested. The remaining new shares shall be offered for public subscription.
The new shares issued due to capital increase, may be cash or in kind. If there are shares in kind, the Board of Directors shall take the measures provided for in the Companies Law to verify the accuracy of valuating these shares.
Under a resolution of the Extraordinary General Assembly, which is based on reasonable justifications and after the approval of the Capital Market Authority, The Company's capital may be reduced if the capital has been in excess of The Company’s needs, or The Company has suffered losses. Such resolution shall not be issued until the Extraordinary General Assembly reviews the auditor's report explaining the reasons of such reduction, The Company’s obligations, and the effect of such reduction on the Company’s obligations. The resolution shall also indicate the reduction method. If the capital reduction is due to excess of capital over The Company’s needs, creditors shall be invited to present their objections within sixty (60) days from the date of publication of the resolution to reduce in at least two daily newspapers circulated in the kingdom. If a creditor objects and timely submits documents thereof to The Company, The Company shall pay the debt if due, or provide an adequate guarantee of payment if it is yet to mature.
Chapter Three: Board of Directors
(A) The company shall be managed by a Board of Directors comprising nine members who shall be appointed by a resolution of the Council of Ministers upon nomination by the Chairman of the Capital Market Authority. Members shall choose from among themselves a chairman and a vice chairman. The members shall be:
- A representative of the Ministry of Finance;
- A representative of the Ministry of Commerce and Industry;
- A representative of the Saudi Arabian Monetary Agency;
- Four members representing licensed brokerage companies; and
- Two members representing the joint stock companies listed on the Saudi Stock Exchange.
(B) The term of the membership of the Board of Directors shall be three years renewable once or more.
(C) The regulations and instructions issued by the Capital Market Authority’s Board of Commissioners shall specify the procedures of convening the meetings of The Company's Board of Directors, the decision-making process thereby, the plans for conducting affairs thereof, the powers and responsibilities entrusted to each of the Board of Directors and the chief executive officer, and all such other related administrative and financial affairs. The Chairman of the Board of Directors shall represent The Company in its relations with third parties, government authorities, companies, individuals, courts of all grades and types, the Notary Public, Board of Grievances, Committee for the Resolution of Securities Disputes (CRSD), arbitration committees, Chamber of Commerce and Industry, and dispute committees of all grades and types. He is accordingly entitled to assume pleading and defending on behalf of the company, presenting evidence and documents, concluding settlements and waivers, as well as the right of acquittal, denial, acknowledgement and taking oath, all within the limits of the Board of Directors’ resolutions; he is further entitled to receive decisions and execute thereof, sign on behalf of The Company on contracts for establishing companies, whether by The Company solely or jointly with third parties; and other contracts, deeds and transfer of property deeds before the Notary Public and before public or private bodies. He may also sign contracts, loan agreements, other financial agreements, pledges, and leases. He may appoint an agent or authorize thereof in respect of one or some of his powers.
(D) The Board of Directors shall appoint a chief executive officer after obtaining the approval of the Capital Market Authority’s Board of Commissioners. The appointed chief executive officer shall not be allowed to assume any other public or private duties, or to have interests or ownership in any brokerage company active in the Saudi Capital Market. The chief executive officer may be removed from his duties by a decision of The Company's Board of Directors.
Article (17): Terms of Reference of the Board of Directors:
1. General Duties of the Board of Directors
(A) The Board of Directors shall be responsible for achieving The Company’s strategic and operational objectives, where it is namely responsible of:
- The Company’s strategy and action plan
- The annual budget.
- Policies of risk management and business soundness.
- Major capital expenditures, and acquisitions of and partnership in other companies.
- Setting The Company’s performance standards.
- Soundness of The Company’s financial and accounting systems as well as auditing systems.
- Compliance with appropriate risk management systems and measures.
(B) The Board of Directors shall prepare an annual report on The Company’s performance for the review of the General Assembly. A copy of the report shall be submitted to the Capital Market Authority’s Board of Commissioners.
(C) The Board shall prepare and submit an annual strategic business plan for the approval of the General Assembly. A copy of the report shall be provided to the Capital Market Authority’s Board of Commissioners.
2. Regulatory Duties of the Board of Directors
(A) The Board of Directors shall propose necessary rules, regulations and instructions
for the operation of the Saudi Stock Exchange, including the following matters:
- Conditions for the listing of and trading in securities.
- The minimum required capital for brokerage companies, and the financial guarantees required from such companies or employees thereof.
- Instant and regular publication of information relating to executed transactions of securities traded on the Saudi Stock Exchange; and the obligations of the securities issuers, shareholders and members to disclose to the market all the information that the company deems necessary.
- Standards of professional conduct applicable to the Saudi Stock Exchange’s members and employees, members of the Board of Directors, and the chief executive officer of the Saudi Stock Exchange. In addition to the applicable disciplinary procedures and penalties against those who violate such standards or any other conditions or requirements set forth in the regulations and instructions.
- Settlement of disputes among members of the Saudi Stock Exchange and between the members and their clients.
- The conditions and requirements of the membership of the Saudi Stock Exchange and the sustainable procedures for licensed brokerage companies to conduct transactions thereof on the Exchange.
- Determination of fees and commissions for brokers’ services.
- Any other rules and instructions that the Saudi Stock Exchange deems necessary for the protection of investors through ensuring fairness, efficiency and transparency in all related affairs of the Saudi Stock Exchange.
(B) The Company shall submit to the Capital Market Authority the regulations, rules and instructions for the operation of the Saudi Stock Exchange and the amendments thereof for approval by the Capital Market Authority’s Board of Commissioners.
Chapter Four: Shareholders Assemblies
The duly constituted assembly represents all shareholders and shall be convened in the city of The Company's head office. Each shareholder owning twenty (20) shares shall have the right to attend the meetings of the General Assembly and he may appoint another shareholder, who is not a member in the Board of Directors, to attend such meetings. Such appointment shall be by a written authorization.
With the exception of the matters over which the Extraordinary General Meeting has jurisdictions, the Ordinary General Assembly has jurisdiction over all The Company's affairs, and shall convene at least once a year within the six months following the end of the fiscal year. Other Ordinary Assemblies may be invited whenever the need arises.
Subject to the approval of the Capital Market Authority’s Board of Commissioners, the Extraordinary General Assembly may amend The Company’s Bylaws, except for the provisions stipulated in the Capital Market Law and those specific provisions the Extraordinary General Assembly is legally restricted from amending. It may pass resolutions on matters within the jurisdiction of the Ordinary General Assembly, under the same terms and conditions prescribed for the latter.
The Shareholders General Assembly shall convene at the invitation of the Board of Directors. The Board of Directors shall invite to Ordinary General Assembly upon the request of the auditor or a number of shareholders representing at least (5%) of the capital. The invitation for General Assembly meeting shall be published in the Official Gazette and a daily newspaper distributed in area where the head office of The Company is located at least 25 days prior to the date of holding the meeting. The invitation shall include the agenda, and a copy of the same shall be sent to the General Directorate of Companies at the Ministry of Commerce and Industry within the period specified for publication.
Upon commencing the assembly meeting, a list showing the names of present or represented shareholders, together with their place of residence, number of shares they hold in person or by proxy, and the number of votes allocated thereto. Any interested party shall have access to the said list.
The meeting of the Ordinary General Assembly shall be valid only if attended by shareholders representing at least half of the capital. If this quorum for the meeting is not met, an invitation to a second meeting to be held within the following thirty days shall be extended. The invitation shall be announced in the manner provided for in Article (21) herein. The second meeting shall be deemed valid regardless of the number of shares represented therein.
The meeting of the Extraordinary General Assembly shall be valid only if attended by shareholders representing at least half of the capital. If this quorum for the meeting is not met, an invitation to a second meeting in the same manner and conditions set forth in the preceding article. The second meeting shall be deemed valid if attended by shareholders representing at least one quarter of the capital.
The resolutions of the Ordinary General Assembly shall be made by the absolute majority of the shares represented in the meeting. The resolutions of the Extraordinary General Assembly are issued by a majority of two-thirds of shares represented in the meeting; unless, however, the resolution relates to increase or reduction of the capital, extending the term of The Company, or immaturely dissolving The Company before expiry of the period specified in The Company's Bylaws, where the resolution shall not be valid unless it is passed by three-quarters of the shares represented in the meeting.
Each shareholder shall have the right to discuss the matters listed in the agenda of the assembly and raise questions relating thereto to the members of the Board of Directors and the auditor. The Board of Directors and the auditor shall in turn answer such questions to the extent that does not expose The Company's interest to damage. If the shareholder finds the response not convincing, the shareholder may refer the question to the Assembly whose decision on the matter shall be binding.
The General Assembly shall be presided by the Chairman of Board of Directors or his representative in his absence. The Chairman shall appoint a secretary to the meeting and a vote collector. Minutes of meetings shall be taken containing the names of the present or represented shareholders, the number of shares they hold in person or by proxy, the number of votes thereof, the resolutions adopted, the number of agreeing or disagreeing votes, and a summary of the meeting discussions. In addition, the minutes shall be regularly written after each meeting in a special record and signed by the Chairman of the assembly, secretary and the vote collector.
Until a part of The Company's shares is offered to the public in accordance with Article 7 herein, The Company’s Board of Directors shall have the terms of reference of the Ordinary general Assembly. The Board of Directors of the Public Investment Fund shall have the terms of reference of the Extraordinary General Assembly.
Chapter Five: The Auditor
The Company shall have one or more financial auditor from among the auditors licensed to practice in the Kingdom. The General Assembly shall annually appoint such auditor and determine his remuneration; and may re-appoint him.
The auditor shall have access at all times to The Company's books and records and other documents; and may request data and explanations, as he deems necessary. He may also verify The Company's assets and liabilities. The auditor shall provide the annual General Assembly with a report showing The Company’s attitude towards enabling him access to the data and explanations he requested, any violations to the provisions of the Companies Law, Capital Market Law or these Bylaws he might have found, in addition to his opinion on truth and fairness of The Company's accounts. A copy of the auditor's report shall be provided to the Capital Market Authority’s Board of Commissioners.
Chapter Six: The Company's Accounts and Profit Distribution
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The fiscal year shall start on the first of January and end on the last day of December of each year. The first fiscal year shall start from the date of the resolution establishing The Company until the end of December of the following year.
The Board of Directors shall prepare, within four months following the end of The Company’s fiscal year, an annual report on The Company's activities and shall include The Company’s balance sheet, profits and loss statement, and the auditor's report. This report shall be forwarded to the Ordinary General Assembly and then to the Capital Market Authority’s Board of Commissioners. The General Directorate of Companies at the Ministry of Commerce and Industry shall be provided with a copy thereof.
Annual net profits of The Company, after deducting general expenses and other costs, shall be distributed in the following manner:
- Ten percent (10%) of net profits shall be appropriated to statuary reserve. The Ordinary General Assembly may stop such appropriation once these reserves reach half of the capital.
- The Ordinary General Assembly may, upon a proposal from the Board of Directors, appropriate a portion of the net profit to form a voluntary reserve that is allocated to certain purpose or purposes.
- From the remaining profits, an initial payment equal to 5% of the paid up capital, shall be distributed to the shareholders.
- Following on the foregoing, a percentage of the remaining profits shall be allocated as remuneration to the Board of Directors, as decided by the General Assembly. Such percentage shall not exceed (0.5%) of the net profits after the forgoing deductions. The remaining part shall be distributed to shareholders as an additional proportion of the profits.
The profits to be distributed to shareholders shall be distributed in the place and time decided by the Board of Directors, provided the profits are distributed within one month of the date of the General Assembly's decision of distribution.
Chapter Seven: Dissolution of the Company and Liquidation
If The Company's losses amount to three-quarters of the capital, the Board of Directors shall call the Extraordinary General Assembly to consider continuation of The Company or liquidation thereof before its expiration date as provided for under Article (4) herein. In all cases, the Assembly decision shall be published in the Official Gazette.
Upon the expiration of The Company's term or in case of liquidation thereof before maturity, the Extraordinary General Assembly, upon a proposal of the Board of Directors, shall decide on the liquidation method and shall appoint one liquidator or more, and determine their powers and remuneration. Upon the appointment of a liquidator, the role of the Board of Directors shall be deemed expired, while the General Assembly shall continue throughout the liquidation period until such a time when the final liquidation is approved.
Chapter Eight - Final Provisions
The Capital Market Law and the Companies Law shall apply to The Company on all matters not provided for in these Bylaws.
These Bylaws shall be deposited and published in accordance with the provisions of the Companies Law.