Article 20 of the Saudi Finance Companies Control Law
المادة 20 من نظام مراقبة شركات التمويل
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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 منهم بالعقد .
2- أي علاقة لأقاربهم إلى الدرجة الثانية بالعقد.
3- أي مصلحة مالية لهم بمن له علاقة بالعقد.
وللمتضرر في حال عدم الإفصاح؛ إقامة دعوى أمام المحكمة المختصة بطلب إبطال العقد.
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 20 explained in plain English
This article deals with conflict of interest in finance contracts. It binds each of:
- The chairman of the board of directors and its members.
- The company's employees.
When any finance contract is made on which they have the power to take a decision, they must disclose in writing:
- Any relationship of any of them with the contract.
- Any relationship of their relatives to the second degree with the contract.
- Any financial interest they have in whoever has a relationship with the contract.
The obligation does not cover every employee, but whoever has decision-making power in the contract concerned. And the disclosure must be in writing; saying it is not enough.
The sanction: if disclosure is not made, the injured person may bring a case before the competent court seeking voiding of the contract. The article did not specify who the injured person is or the conditions for accepting the case.
It is preceded by Article 19 on the audit committee, and followed by Article 21, which provides for SAMA's supervision of finance companies' work.
If you believe you were harmed by a finance contract in which an interest was not disclosed, it is advisable to consult a lawyer who specializes in banking and finance.
Practical example
An employee of a finance company in Jeddah, who has the authority to approve applications, approved finance for a company in which his brother owns a share, without disclosing this relationship in writing. If anyone is harmed as a result, he may bring a case before the competent court seeking voiding of the contract.
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 20 of the Saudi Finance Companies Control Law
Must a finance company employee disclose his relationship with a finance contract?
Yes. If he has decision-making power in the contract, he must disclose in writing his relationship or his relatives' relationship to the second degree, or his financial interest in whoever has a relationship with the contract.
What happens if there is no disclosure?
The injured person may bring a case before the competent court seeking voiding of the contract.
Is oral disclosure enough?
No. The article requires the disclosure to be in writing.
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 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
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.