Article 18 of the Saudi Finance Companies Control Law
المادة 18 من نظام مراقبة شركات التمويل
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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 الخسائر الناتجة من تقديم تمويل دون ضمان.
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 18 explained in plain English
This article establishes joint liability on the members of a finance company's board of directors in a specific case: losses resulting from providing finance without security.
"Jointly" means that responsibility falls on the members together, so that they bear together the guaranteeing of the company's rights against these losses.
The article begins with the phrase "without prejudice to what is stated in paragraph (1/a) of Article 12". That paragraph prohibits a finance company from providing any finance without security, and excepts the rules for finance without security that the Regulations specify. So the prohibition already stands, and this article adds to it the board's responsibility for losses resulting from this type of finance.
Two things thus come together:
- The prohibition on finance without security except under the Regulations' rules (Article 12).
- Board members bearing jointly the guaranteeing of the company's rights against the losses of finance without security (this article).
It is preceded by Article 17, which establishes the responsibility of the board and executive management, each within the limits of his jurisdiction, for the company's breaches, and followed by Article 19 on the audit committee.
Because applying joint liability requires a legal assessment of each case, it is advisable to consult a lawyer who specializes in banking and finance.
Practical example
A finance company in Riyadh granted a large finance to a customer without any security, then the customer defaulted and the company lost the amount. Under this article the members of the board of directors bear jointly the guaranteeing of the company's rights against this loss.
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 18 of the Saudi Finance Companies Control Law
Does a finance company's board bear the losses of finance without security?
Yes. The board members bear jointly the responsibility of guaranteeing the company's rights against losses resulting from providing finance without security.
Is a finance company allowed to provide finance without security at all?
Paragraph (1/a) of Article 12 prohibits it, and as an exception the Regulations set the rules for finance without security.
Articles this article refers to
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 16
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.
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 حساباته
- 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 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.