Article 19 of the Saudi Finance Companies Control Law
المادة 19 من نظام مراقبة شركات التمويل
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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 العامة للشركة بناءً على اقتراح مجلس الإدارة.
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 19 explained in plain English
This article requires every finance company to form an audit committee, and sets basic controls for it:
- Its composition: from outside the executive members of the board of directors, that is, its members are not members who handle day-to-day management. The evident purpose is to ensure a degree of independence in internal oversight.
- Its organization: its tasks, the rules for choosing its members, the term of their membership and how it works are set by a decision of the company's general assembly.
- Who proposes: the general assembly's decision is issued on the proposal of the board of directors.
The article did not specify the committee's tasks in detail or the number of its members, but left that to the general assembly, which represents the shareholders.
It is preceded by Article 18, which makes board members jointly responsible for the losses of finance without security, and followed by Article 20, which requires the chairman and members of the board and the employees to disclose in writing their relationship with finance contracts. All of these provisions aim at sound governance within the company.
Companies working on preparing the audit committee's rules can consult a lawyer who specializes in banking and finance.
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 19 of the Saudi Finance Companies Control Law
Must a finance company have an audit committee?
Yes. An audit committee is formed in every finance company.
Can an executive board member sit on the audit committee?
The article provides that the committee is formed from outside the executive members of the board of directors.
Who sets the audit committee's tasks?
The company's general assembly, by a decision issued on the proposal of the board of directors.
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 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 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.