Ministry of Commerce and Industry and CMA Clarify Implementation Mechanism for New Companies Law

​Further to what was announced by the Ministry of Commerce and Industry and the Capital Market Authority (CMA) on 15/05/1437H corresponding to 24/02/2016 regarding  the memorandum of cooperation signed between them over the application and implementation of the new companies law, which comes in pursuit of the Ministry and the Authority's efforts  to cooperate and coordinate their policies and procedures in the application of the companies law in order to achieve integration and harmony in implementing the  Rule's objectives. And since the new Companies' Law was published  in the gazette, Umm al Qura,  on 22/02/1437 H corresponding to 04/12/2015, it shall be implemented and effective as of 25/07/1437H corresponding to 02/05/2016.

According to Article (224) of the Companies Law stating that " Existing companies, when the law is effective, should amend their positions in accordance to its provisions in a period of time not exceeding one year starting from the effective date. The ministry and the CMA board , as an exception, shall determine in accordance to their competencies the provisions to which those companies shall be subject to during that period."   Hence, existing companies prior to the effective date of the rules shall have an extension of no longer than one year to modify their position to comply with the new rules. The extension does not include new companies which are established after the implementation of the Law. It also does not affect  the penalties on crimes and offenses  set by the rules when committed.

Examples of the provisions that give the company an extension period to be repositioned are: paragraph (1) of Article 68 and Article 76, paragraph (1) of Article 81 and Article 101, Article 102, Article 103 and Article 104,Article 150, Article 182, Article 183, Article 184, Article 185, and Article 186  of the rules.

Examples of the Provisions in which companies can get an extension to fix its position


Article NumberArticle Subject
​Paragraph 1 of 68Specify the number of a joint stock company Board  members
76​​Regulating the remuneration of Board members 
​ Paragraph 1 of 81Specify and define  the functions of the chairman and his deputy and the managing director
101​​Forming an Audit Committee of non-executive Board members
102​​Regulate issuing te Audit Committee resolutions
​103​​Audit Committee Mandate
104​​Audit Committee Mandate
150​​Regulate dealing with losses of joint stock companies
​182​​Regulate a holding company
183​​Purpose of a holding company
184​​Prohibiting the ownership of shares of the holding company by a subsidiary
​185​The financial statements of the holding company
​186​Holding Company Rules


Examples of the provisions that companies must comply to from the effective date of the Law as per Article 90 and 95

Examples of the provisions that companies must comply to from the effective date of the Law

Article Number​​Article Subject
​90​Regulate the meetings of general assemblies or those private for investors by an invitation from the Board.
​95​Regulate the use of cumulative voting in the election of the Board of Directors, and determine the voting members of the Board of Directors.


In addition, companies may not take any action or any installation or development of a new center contrary to the law after the entry into force. For example, the provisions of article 101, 102, 103, and 104 are applicable when a new resolution for the formation or reformation  of the audit committee, as well as paragraph (1) of Article 68 when appointing a new Board member after the Law is affective.

It should be noted that companies and shareholders shall be able to exercise all the rights contained in the law from the date of its entry into force, taking into account- if necessary- amending the basic rules and contracts for the companies accordingly,  or from the date of the issuance of the regulations which  that the Ministry and the CMA can exercise the rights as stated by the Law.

As stated in the previous announcement, the Ministry and the CMA intend to publish the draft of the  relevant regulations, to seek the concerned and interested parties comments and observations during the upcoming period.