Article 120 of the Saudi Companies Law

المادة 120 من نظام الشركات · الفرع الثاني: أدوات الدين والصكوك التمويلية

The article provides that shareholders' assembly resolutions apply to holders of debt instruments and financing sukuk, but their rights may not be amended without their approval in a special assembly of their own convened under Article 89.

Official text (Arabic)

This article has not been amended since the law was issued.

تسري قرارات جمعيات المساهمين على أصحاب أدوات الدين والصكوك التمويلية. ومع ذلك، لا يجوز لهذه الجمعيات تعديل الحقوق المقررة لهم إلا بموافقة تصدر منهم في جمعية خاصة بهم تنعقد وفقًا لأحكام المادة

(التاسعة والثمانين) من النظام.

This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers

Article 120 explained in plain English

This article sets out the relationship of holders of debt instruments and financing sukuk to shareholders' assembly resolutions, balancing the company's right to manage its affairs against these holders' right to protect what has been set for them.

The general rule: shareholders' assembly resolutions apply to holders of debt instruments and financing sukuk, so they are affected by what the assemblies decide on the company's affairs.

The exception protecting their rights:

Shareholders' assemblies may not amend the rights set for holders of debt instruments and sukuk.
Except with approval given by them in an assembly of their own.
This special assembly is convened in accordance with the provisions of Article 89 of the Law.

The practical meaning: the shareholders' assembly alone cannot decide, for example, to change the rights set for sukuk holders; the sukuk holders themselves must approve it, meeting together in their special assembly. Sukuk holders are therefore not at the mercy of the shareholder majority in everything that affects their rights.

This protection complements what Article 119 provides, namely that annulment of an act in breach of Articles 117 and 118 may be requested from the competent judicial authority, together with compensation for holders of debt instruments or sukuk for the harm. This article itself does not state the quorum or majority of the special assembly, as it refers to Article 89 for its convening. Sukuk holders who believe their rights were amended without their approval may consult a lawyer who specializes in companies and securities.

Practical example

A joint stock company in Riyadh issued financing sukuk that give their holders a periodic return specified in the issue terms. The general assembly then wanted to change these terms in a way that affects the sukuk holders' rights. This cannot be done by a resolution of the shareholders' assembly alone; the sukuk holders must approve it in an assembly of their own convened in accordance with Article 89.

Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.

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