Article 21 of the Saudi Real Estate Investment Schemes Law
المادة 21 من نظام المساهمات العقارية · الفصل الثالث: إدارة المساهمة العقارية
The article prohibits the licensee and the scheme manager from taking any decision or action involving an existing or potential conflict of interest, without prejudice to Article 14, and refers the handling of such cases to the Implementing Regulations.
Official text (Arabic)
This article has not been amended since the law was issued.
دون إخلال بما نصت عليه المادة (الرابعة عشرة) من النظام، لا يجوز للمرخص له ولا لمدير المساهمة العقارية اتخاذ أي قرار أو إجراء إذا كان هناك تعارض مصالح قائم أو محتمل في هذا القرار أو الإجراء. وتحدد اللائحة طريقة التعامل مع حالات تعارض المصالح.
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 21 explained in plain English
This article sets out a strict rule against conflicts of interest in the management of a real estate investment scheme:
- Who is bound? The licensee and the scheme manager.
- What is prohibited? Taking any decision or action.
- When? If it involves a conflict of interest that is existing or even potential; it is not required that harm has occurred or that the conflict is certain.
The article refers to the Implementing Regulations to determine how conflict-of-interest cases are to be handled; the article itself does not set out the procedure to follow when a conflict arises.
The article begins with the phrase "without prejudice to what Article 14 provides", which is the article that requires the licensee to supervise the work of the scheme manager and enable the manager to perform their duties. The prohibition on conflicting decisions therefore does not remove the licensee's obligation to supervise and enable; both provisions remain in force together.
An example of what may trigger this rule is where the decision-maker has a personal interest in the other party to a transaction. This provision is connected to Article 20, which allows the manager to be removed for abusing their powers or failing to perform their obligations.
If shareholders suspect a conflict of interest in a decision concerning their scheme, they can consult a lawyer specializing in real estate cases.
Practical example
The manager of a real estate investment scheme in Riyadh proposed awarding the infrastructure works to a contracting company owned by the manager's brother. This decision involves at least a potential conflict of interest, so the manager may not take it, and the case is handled as determined by the Implementing Regulations.
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 21 of the Saudi Real Estate Investment Schemes Law
May a scheme manager take a decision in which they have a personal interest?
No. Neither the licensee nor the scheme manager may take any decision or action if it involves an existing or potential conflict of interest.
Does the conflict of interest have to be certain?
No. The prohibition covers both existing and potential conflicts.
How are conflict-of-interest cases handled?
The Implementing Regulations determine how conflict-of-interest cases are to be handled.
Articles this article refers to
More articles on Real Estate Scheme Manager
- Article 14
The article requires the licensee, subject to Article 19, to supervise the scheme manager's work and enable the manager to carry out its duties.
مع مراعاة ما نصت عليه المادة (التاسعة عشرة) من النظام، على المرخص له الالتزام بالإشراف على أعمال مدير المساهمة العقارية، وتمكينه من القيام بواجباته.
- Article 19
The article provides that a real estate investment scheme is run by a scheme manager appointed by the licensee, and refers the manager's conditions, requirements, powers, duties and responsibilities to the Implementing Regulations.
يدير المساهمة العقارية مدير المساهمة العقارية الذي يُعيّنه المرخص له. وتحدد اللائحة اشتراطات ومتطلبات مدير المساهمة العقارية وصلاحياته ومهماته ومسؤولياته.
- Article 20
The article allows the licensee, the Authority and the assembly to remove the scheme manager, in accordance with the Implementing Regulations, if the manager abuses their powers or fails to perform their obligations, without prejudice to any penalty.
يحق للمرخص له وللهيئة وللجمعية عزل مدير المساهمة العقارية وفق ما تحدده اللائحة في حال إساءته استخدام صلاحياته أو إخلاله بتنفيذ التزاماته، ولا يخل ذلك بأي عقوبة
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.