Given the economic standing enjoyed by joint stock companies, the Saudi legislator was keen to devote six chapters to them within Part Four of the new Companies Law issued pursuant to Royal Decree No. (M/132) dated 1/12/1443H, in order to set out their provisions and the information and procedures involved in their incorporation.
This article is dedicated to explaining the voting mechanism in the ordinary and extraordinary general assemblies of joint stock companies, as follows:
- First: Ordinary Voting.
Every shareholder has the right to attend the general assembly meeting and vote on resolutions, and may appoint as proxy a person who is not a member of the board of directors even if the company’s bylaws provide otherwise (1). The right to attend the general assembly, in both its types, is a matter of public order (2). Voting shall be by secret ballot if the resolution relates to the election of members of the board of directors, their removal, or the bringing of a liability action against them (3).
- Second: Voting by Means of Modern Technology.
Shareholders may participate in meetings of the general or special assemblies and in their deliberations, and may review their agendas and the relevant documents through modern technological means, in accordance with the following controls (4):
- The shareholder’s participation must be by means of a live audio and visual transmission of the meeting of the general or special assembly.
- The shareholder must be enabled to participate effectively and in an automated manner that allows the shareholder to listen, follow presentations, express views, discuss, and vote on resolutions.
The company may allow shareholders to vote electronically on the items of the agenda of meetings of the general or special assembly even if they do not attend such meetings, in accordance with the following (5):
- Enabling shareholders to cast their votes either before the meeting or during it without the need to appoint a proxy to attend on their behalf.
- The electronic voting window for the items of the agenda of any general or special assembly meeting shall open after the date of dispatch of the invitation, provided that the period during which electronic voting is made available shall not be less than three days prior to the date of the assembly. Electronic voting on any agenda item of the general or special assembly meeting shall be suspended upon completion of the discussion and voting on that item in the assembly.
Holding meetings of the general or special assemblies of shareholders through modern technological means shall not preclude holding such meetings at the place specified in the invitation and granting shareholders the right to attend such meetings in person.
If a joint stock company holds a meeting of the general or special assembly through modern technological means, the board of directors must put in place the procedures necessary to verify the identity of the shareholder voting electronically and the shareholder participating in the assembly meeting, and to verify that shareholder’s entitlement to vote on any of the meeting’s agenda items (6).
- Third: Cumulative Voting.
This means a voting method for the election of members of the board of directors that grants a shareholder holding voting shares a voting capacity equal to the number of such shares, enabling the shareholder to cast all of those votes for a single candidate or to distribute them among such candidates as the shareholder chooses, without repeating those votes (7). Many legal systems have adopted cumulative voting (8).
- Fourth: Agreements and Restrictions on the Right to Vote.
- Agreements Concerning the Right to Vote:
We have not found an express legal regulation of voting agreements. Accordingly, determining the conditions for their validity requires recourse to judicial jurisprudence, including French case law, which affirmed the necessity of three fundamental conditions to ensure the validity of a voting agreement, namely: that the agreement be specific, that there be no fraud or manipulation, and, thirdly, that such agreements must not conflict with the company’s interest (9).
There is also an opinion in legal scholarship that rejects voting agreements, maintaining that a shareholder may not undertake to vote in a particular manner, because the shareholder must exercise the voting right with complete freedom and keep in view nothing but the company’s interest (10).
- Restrictions on the Right to Vote:
As a general rule, the right to vote is a matter of public order and may not be restricted or the shareholder deprived of it. Accordingly, the legislator imposed a fine not exceeding five hundred thousand riyals on any person who prevents a partner or shareholder from enjoying the voting rights associated with that person’s quotas or shares in the company in violation of the provisions of the Law (11). By way of exception to this general rule, there are two cases in which a shareholder may be deprived of the right to vote: failure to pay the value of the share, and voting on the report of the valuator of in-kind contributions upon incorporation of the company or upon an increase of capital (12).
Sources:
(1) Article (Eighty-Four, paragraph Two) of the Companies Law issued by Royal Decree No. (M/132) dated 1/12/1443H.
(2) Prof. Samihah Al-Qalyubi, Commercial Companies, Fourth Edition 2008, Dar Al-Nahda Al-Arabiyyah, Cairo, pp. 860 to 861.
(3) Prof. Mahmoud Samir Al-Sharqawi, Commercial Companies in Egyptian Law, Second Edition 2016, revised by Mr. Wael Anwar Bandaq, Dar Al-Nahda Al-Arabiyyah, Cairo, p. 293.
(4) Article (Twenty-Four, paragraph One) of the Implementing Regulation of the Companies Law issued pursuant to Minister of Commerce Decision No. (284) dated 23/6/1444H.
(5) Article (Twenty-Four, paragraph Two) of the same Implementing Regulation. On its details, Dr. Mahmoud Muhy Al-Din Muhammad, The Legal Aspects of Electronic Voting in General Assembly Meetings of Joint Stock Companies, Damietta Rights Journal for Legal and Economic Studies, Faculty of Law, Damietta University, Issue Six, July 2022, p. 25 et seq.
(6) Article (Twenty-Five) of the Implementing Regulation of the Companies Law.
(7) Article One of the same Implementing Regulation.
(8) Attorney Dr. Musaed Saud Alrashidi, “Voting in a Joint Stock Company and the Restrictions Thereon in the Saudi Companies Law”, “An Analytical Study”, p. 21.
(9) Paris Court of Appeal, Fifth Chamber, Appeal No. 93/27606, session of 30/6/1995, cited in Dr. Hanan Safwat Bahnasaawi, Shareholders’ Agreements in Closed Joint Stock Companies, A Comparative Study, Legal Journal (a specialized journal in legal studies and research), Faculty of Law, Cairo University, Khartoum Branch, 2025, p. 1388.
(10) Prof. Muhammad Farid Al-‘Arini, Commercial Companies, 2007 edition, Dar Al-Jami‘ah, Alexandria, p. 302, cited in Attorney Dr. Musaed bin Saud Al-Rashidi, “Voting in a Joint Stock Company and the Restrictions Thereon in the Saudi Companies Law”, “An Analytical Study”, p. 26, footnote (Four).
(11) Article (Two Hundred Sixty-Two, subparagraph A) of the Saudi Companies Law.
(12) Dr. Musaed Saud Alrashidi, the aforementioned reference, p. 27.
