Why Every Company in SA Needs a Corporate Governance Framework Lawyer?

Corporate governance framework has evolved over time; from being informal and spontaneous practices for centuries, it has developed since the 1970s into a globally recognized framework that ensures fairness and clarity in relationships among all parties within a company. Governance models vary across economic environments while the Anglo-American model focuses on protecting shareholder rights, the Japanese model emphasizes centralized decision-making and stakeholder integration.

In Saudi Arabia, corporate governance has become a key pillar for ensuring integrity and compliance, with strict regulations and standards that enhance investor confidence and support corporate sustainability in a competitive and evolving business environment.

The Concept of a Corporate Governance Framework

The Corporate Governance Framework issued by the Saudi Capital Market Authority is a regulatory framework aimed at enhancing the integrity of financial transactions by establishing clear controls that balance the protection of shareholders’ private rights with the achievement of public interest.

It consists of a set of rules that guide the management of the company and oversee its internal and external relationships, defining the mechanisms of interaction between the board of directors, executive management, shareholders, and stakeholders.

The framework also sets out clear procedures that facilitate decision-making and ensure that it is carried out with transparency and credibility, thereby contributing to the protection of rights, the achievement of justice, the promotion of competitiveness, and the enhancement of transparency within the market and business environment.

What are the Elements of a Governance Framework?

Implementing a corporate governance system is a fundamental step that strengthens transparency, reinforces accountability, and enhances the efficiency of administrative performance over the long term. Governance is not just about written regulations; it is a work culture that translates into practical actions reflecting the company’s sustainability and investors’ trust. Below are the key elements that form the foundation for implementing an effective corporate governance system within companies:

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1- Promoting Diversity in the Leadership Structure

Studies show that companies with more diverse boards of directors—considering gender, age groups, and cultural backgrounds—are better equipped to handle risks and maintain greater stability in stock returns. Diversity is not just about representation but also about including people with different perspectives and skill sets, creating a rich environment for innovative ideas. Therefore, diversity should be a fundamental goal when forming boards of directors and senior management teams.

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2- Transparency and Clear Disclosure

Transparency means that all significant information about the company should be made available to shareholders and stakeholders in a timely manner, including strategic policies, periodic financial reports, board decisions, and any critical events that may affect the company’s performance. It is recommended to set a clear disclosure plan—monthly, quarterly, or annually—so that shareholders know what to expect and can make informed decisions.

3- Clarity of Shareholder Rights

Each shareholder must have a clear understanding of their rights, whether voting rights are equal or certain classes of shares have special privileges. It is essential to outline the extent of shareholder authority in approving key decisions, as well as the company’s approach to related-party transactions or extraordinary deals. Having a well-defined policy to protect minority shareholders helps build trust and reduces the risk of conflicts.

4- Comprehensive Board Reports

A strong board relies on accurate and comprehensive reports that provide a clear picture of the company’s current position, enabling well-informed strategic decisions that foster growth and sustainability. High-quality reports go beyond financial data to include performance indicators, development plans, and future opportunities.

5- Continuous Training and Evaluation for the Board

Board members and executives must undergo regular training to stay updated on changes in local and international laws and regulations. Conducting periodic evaluations of board performance is also crucial for improving its effectiveness and ability to face emerging challenges, especially with the growing demands and complexities of corporate governance.

6- Invisible yet Effective Governance

The most effective governance systems are those that are not felt as a burden but are present in every aspect of operations. They are not complicated procedures that slow down workflows but rather seamless tools that structure relationships and responsibilities while maintaining flexibility and efficiency. In essence, the success of governance is reflected in results rather than in the number of formalities.

These elements collectively form the foundation for building a strong and effective governance culture that drives companies toward excellence and long-term sustainability.

Governance framework examples

Corporate governance in Saudi Arabia is considered a fundamental pillar for enhancing the business environment and achieving transparency in company management. It is not just a legal requirement but also a strategic tool that ensures sustainable growth in the long term.

Many investors and entrepreneurs often ask: What is the real role of governance in driving companies toward success? The answer lies in the level of commitment companies have to practically implementing governance principles, as the results of this commitment are evident in achieving a balance between shareholders’ interests and the protection of stakeholders’ rights.

For example, one of the leading Saudi companies in the food industry adopted an integrated corporate governance model that includes the establishment of independent committees to review performance and the implementation of transparent policies for financial reporting. This approach not only improved decision-making but also helped the company manage risks more efficiently and clearly define responsibilities, which, in turn, increased the confidence of both investors and customers.

Why Do You Need a Corporate Governance Lawyer in Saudi Arabia?

In today’s fast-paced business environment, corporate governance in Saudi Arabia has become the cornerstone for enhancing transparency, building strong investor trust, and ensuring long-term business sustainability. Adhering to governance principles is no longer an optional step; it is a necessity that reflects a company’s professionalism, competitiveness, and ability to overcome challenges.

Business owners and entrepreneurs now realize that hiring a corporate governance lawyer is an investment in success rather than just legal support. This is where Etqan Law Firm and Legal Consultancy stands out as one of the leading firms in this field across Riyadh and the entire Kingdom, thanks to its team of expert lawyers who combine deep legal knowledge with extensive practical experience.

Our Corporate Governance Services at Etqan:

1. Compliance with Local Regulations:
    We help companies fully understand and implement Saudi regulations, providing practical consultations that ensure complete compliance with governance principles.
2. Custom Policy and Procedure Design:
    We create comprehensive governance policies tailored to the size and activity of each company, ensuring alignment with both local and international standards.
3. Building Effective Organizational Structures:
    We establish clear administrative frameworks that define roles and responsibilities, minimizing conflicts of interest and strengthening internal discipline.
4. Risk Assessment and Management:
    We assist in identifying and evaluating legal and administrative risks, developing effective strategies to manage them.
5. Family Business Governance:
    We specialize in structuring family-owned companies to balance family relations with sound management practices, ensuring continuity across generations.
6. Enhancing Investor Appeal:
    By implementing sound governance practices, we enhance your company’s reputation as a professional and transparent entity, making it more attractive to investors.

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Conclusion:

Building a strong corporate governance framework is not merely about compliance with regulations; it is about creating a culture of transparency, accountability, and sustainable growth.For organizations aiming to implement or strengthen their governance structures, working with experienced legal professionals can make a substantial difference. Etqan Law Firm offers expert guidance in designing customized governance policies, ensuring regulatory compliance, and building frameworks that align with both local and international standards.

The Etqan Al Mutamayza Law Firm is ready to provide the essential support you need. You can reach their team at the following mobile numbers: +966550600204, +966551020060.

Additionally, feel free to visit our branches located at:

• Jeddah: Al-Aziziyah District, Mohammed bin Abdulaziz Street (Tahlia)
• Riyadh: King Abdulaziz Street, across from the Kingdom Tower
• Dammam: Al-Ashri’a Street, Al-Badeea, Dammam 32415.

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