Article 16 of the Saudi Finance Companies Control Law
المادة 16 من نظام مراقبة شركات التمويل
The article sets five conditions for membership of a finance company's board of directors, including not sitting on another finance company's board and no bankruptcy, disciplinary dismissal or conviction for a crime involving breach of trust.
Official text (Arabic)
This article has not been amended since the law was issued.
يشترط لعضوية مجلس إدارة شركة التمويل ما يأتي:
1- ألاّ يكون عضوًا في مجلس إدارة شركة تمويل أخرى.
2- ألاّ يجمع بين العمل في مراقبة شركات التمويل أو مراجعة حساباتها والعضوية في مجلس إدارة الشركة.
3- ألاّ يكون قد عزل تأديبيًا من وظيفة قيادية تنفيذية في منشأة مالية.
4- ألاّ يكون قد سبق أن أشهر إفلاسه.
5- ألاّ يكون محكومًا عليه بعقوبة لإدانته في جريمة مخلة بالأمانـة، وذلك ما لم يكن قـد رد إليه اعتباره وفقًا للأنظمة، أو وفق ما تحدده اللائحة.
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 16 explained in plain English
This article sets the conditions for anyone who sits on a finance company's board of directors. The member must:
- Not be a member of the board of another finance company, to avoid conflicts of interest between competing companies.
- Not combine working in the supervision of finance companies or auditing their accounts with membership of the company's board, so the supervisor is not a member of the one he supervises.
- Not have been disciplinarily dismissed from a senior executive position in a financial establishment.
- Not have previously been declared bankrupt.
- Not be sentenced to a penalty for conviction of a crime involving breach of trust, unless he has been rehabilitated under the laws or as the Regulations specify.
Note that the fifth condition is not absolute; rehabilitation removes the bar under the laws or the Regulations.
This article comes before Article 17, which makes the board of directors, the general manager, senior executives and branch managers responsible, each within the limits of his jurisdiction, for the company's breach of the Law and its Regulations. So the requirement of competence and integrity in the members is tied to the weight of responsibility placed on them. It is preceded by Article 15 on the confidentiality of customer data.
If you are nominated for membership of a finance company's board and wonder whether these conditions apply to you, it is advisable to consult a lawyer who specializes in banking and finance.
Practical example
Faisal was nominated for membership of the board of a finance company in Riyadh, but he is currently a member of the board of another finance company. Faisal does not meet the membership conditions as long as he is a member of the other company's board.
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 16 of the Saudi Finance Companies Control Law
Can I be a member of the boards of two finance companies?
No. It is a condition of membership of a finance company's board that the member not be a member of the board of another finance company.
Does a conviction for a crime involving breach of trust always bar membership?
It bars it unless he has been rehabilitated under the laws or as the Regulations specify.
May a finance company's auditor be a member of its board?
No. It is a condition that the member not combine working in the supervision of finance companies or auditing their accounts with membership of the company's board.
More articles on Board of Directors of a Finance Company
- Article 12
The article prohibits a finance company from financing without security, against its own shares, or for parties connected to its board members, auditors and staff except as the Regulations specify, and provides for removal of a violating member or auditor.
1- يحظر على شركة التمويل ما يأتي: أ - أن تقدم أي تمويل دون ضمان، واستثناءً من ذلك تحدد اللائحة قواعد التمويل دون ضمان. ب - أن تمول أو تمنح تسهيلات بضمان أسهمها.
- Article 17
The article makes a finance company's board of directors, general manager, senior executives and branch managers responsible, each within the limits of his jurisdiction, for the company's breach of the Law and its Regulations.
يكون كل من مجلس إدارة الشركة، ومديرها العام، وكبار التنفيذيين، ومديري الفروع مسؤولين - كل في حدود اختصاصه - عن مخالفة الشركة لأحكام هذا النظام أو لائحته.
- Article 18
The article makes the members of a finance company's board jointly responsible for guaranteeing the company's rights against losses resulting from providing finance without security, without prejudice to paragraph (1/a) of Article 12.
مع عدم الإخلال بما ورد في الفقرة ( 1/أ) من المادة الثانية عشـرة من هذا النظام؛ يتحمل أعضاء مجلس إدارة شركة التمويل - بالتضامن- مسؤولية ضمان حقوق الشركة ضد الخسا
- Article 19
The article requires an audit committee to be formed in every finance company from non-executive members of the board, with its tasks and membership organized by a general assembly decision on the board's proposal.
تكوّن في كل شركة تمويل لجنة مراجعة من غير أعضاء مجلس الإدارة التنفيذيين، يصدر في شأن مهماتها، وقواعد اختيار أعضائها، ومدة عضويتهم، وكيفية عملها؛ قرار من الجمعية
- Article 20
The article requires the board chairman and members and employees with decision-making power to disclose in writing their relationship, their relatives' relationship or their interest in a finance contract, and allows an injured person to seek voiding of the contract if there is no disclosure.
يجب على رئيس وأعضاء مجلس الإدارة وموظفي الشركة عند إجراء أي عقد من عقود التمويل التي لهم سلطة اتخاذ قرار في شأنها الإفصاح - كتابة - عن الآتي: 1- أي علاقة لأي من
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.