Saudi shareholders can now remove directors under amended CMA rules

Shareholders of Saudi listed companies now have a defined route to remove directors at a general assembly under amendments to the Capital Market Authority's regulation, the authority announced on 2 April.

The amendments are to the Capital Market Authority's Implementing Regulation of the Companies Law for Listed Joint Stock Companies. The English translation of the regulation records the approving board resolution as number 3-44-2026, dated 30 March 2026. This explainer sets out how the process works, based on the regulation text.

Article 69 says the regulation is effective as per its approval resolution. The law firm BLK Partners wrote on 3 September that it was published in the Official Gazette on 3 July 2026 and takes effect from publication.

Who can ask, and on what grounds

Under Article 6, a request to remove directors must come from one or more shareholders holding 10 per cent of the company's voting shares. A request to remove the whole board cannot be made until at least six months have passed since the start of the board's term. To remove individual directors, the applicants must show that a member cannot perform the duties the law prescribes. The regulation gives examples: missing three consecutive or five non-consecutive board meetings, a conviction for a crime involving breach of trust, or a decision by a competent authority that affects the member's ability to act.

Directors carry a duty of their own. A member must tell the board immediately of such a conviction or decision, and the board must recommend removal to the ordinary general assembly once it learns of a final conviction or decision, the regulation says. The authority said the board must do so even if the member has not notified it.

What the board and the assembly must do

When a request arrives, the board must notify the director immediately and, after checking that the request meets the conditions, announce it in the notice calling the general assembly. The notice must name the requesting shareholder and give the reasons. The director may prepare a written statement for shareholders and speak on the request at the meeting, Article 6 says.

If an approved removal would leave the board below the minimum number of members set by the Companies Law or the company's bylaws, the resolution must say that the removal takes effect only after a new board or a replacement is elected. The board must then convene an assembly within 75 days of the approval. The draft the authority published for consultation on 12 November 2025 proposed a 60-day limit. A director who is removed, or who resigns after a removal request and before the vote, cannot be re-nominated to the same company's board until the end of the term of the board concerned.

Related board rules and the enforcement backdrop

The regulation also sets rules on how boards are formed and paid. According to the text:

• Board elections must use cumulative voting, with an exception for Parallel Market companies whose bylaws provide another method (Article 5).
• A shareholder with a bylaw right to appoint directors may hold no more seats than half the board or three, whichever is lower, and may not use the votes behind that right to elect the remaining directors (Article 5).
• Independent directors' pay may not be a percentage of profits or tied directly or indirectly to profitability (Article 9).
• Directors must repay remuneration that was based on false or misleading information given to the assembly or included in the annual board report, if the audit committee or the authority finds that it was (Article 11).
• Companies must let shareholders vote electronically, before or during an assembly, without appointing a proxy (Article 13).
• An assembly may delegate authorisation of certain related-party contracts to the board only where, among other conditions, the total is under 1 per cent of revenue and under SAR 10 million (Article 64).

The amendments also loosen the rules on distributable profits, allowing companies to rely on their latest reviewed or audited statements, the authority said.

The authority said the removal controls are meant to let shareholders exercise their rights and monitor the performance of boards. Its announcements this year show directors facing action through the securities dispute system. On 20 May it referred 17 suspects, including former and current board members of Cenomi Retail, to the Public Prosecution. The next day it announced that an appeal committee had convicted 11 board and audit committee members of Saudi German Health and fined them collectively around SAR 18 million for manipulating financial statements between 2018 and 2021. On 2 June it announced the registration of a class action against board and audit committee members of Raydan Food.