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Article 73 of the Saudi Companies Law

المادة 73 من نظام الشركات · الفرع الأول: مجلس الإدارة

The article provides that a shareholder oversees the board in accordance with the Law and does not interfere in the work of the board or executive management unless he is a member or works in it or acts through the general assembly.

Official text (Arabic)

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

يمارس المساهم الرقابة على مجلس الإدارة وفقًا لأحكام النظام. ولا يجوز للمساهم التدخل في أعمال مجلس الإدارة ولا أعمال الإدارة التنفيذية للشركة ما لم يكن عضوًا في مجلس إدارتها أو يعمل في إدارتها التنفيذية، أو يكن تدخله عن طريق الجمعية العامة ووفقًا لاختصاصاتها.

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 73 explained in plain English

This article draws a dividing line between the ownership of the company and its management in a joint stock company.

The right of oversight: A shareholder exercises oversight over the board of directors in accordance with the provisions of the Law, that is, by the tools the Companies Law provides, not by any method he chooses.

The ban on interference: A shareholder may not interfere in:

  • the work of the board of directors, or
  • the work of the company's executive management.

The exceptions: Interference is allowed in only three cases:

  1. The shareholder is a member of the board of directors.
  2. He works in the executive management of the company.
  3. His interference is through the general assembly and in accordance with its powers.

This means that owning a large number of shares does not by itself give its owner the right to give instructions to the chief executive or to the employees; he expresses his view through the general assembly.

In the context of the neighboring articles, Article 72 prohibits the company from lending to its board members or their relatives, with specific exceptions, and Article 74 gives the board the power to take loans, sell and mortgage assets and release debtors unless the articles of association or the general assembly restrict its powers, which is an example of the board being restricted through the general assembly. Anyone who believes his rights as a shareholder are being disregarded should consult a lawyer specialized in companies.

Practical example

Sultan owns 20% of the shares of a joint stock company in Riyadh and objected to the chief executive's decision to change a supplier, so he called the employees directly to ask them to stop the contract. This is not permitted because he is neither a board member nor working in the executive management; his route is to raise the matter through the general assembly within its powers.

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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Frequently asked questions about Article 73 of the Saudi Companies Law

May a shareholder interfere in the management of a joint stock company?

No, unless he is a member of the board or works in the executive management, or his interference is through the general assembly and in accordance with its powers.

How does a shareholder oversee the board of directors?

He exercises oversight in accordance with the provisions of the Companies Law, including acting through the general assembly within its powers.

Does a large shareholder get management powers?

The article makes no distinction by size of holding; no shareholder interferes in the work of the board or executive management except in the excepted cases.

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The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.