Undoubtedly, the global economic development has been accompanied by an increased need for large-scale projects required by economic activity. (1) Consequently, many Arab countries have focused on enacting laws and regulations governing companies. The Kingdom of Saudi Arabia, in fact, has issued the Companies Law under Royal Decree No. (M/132) dated 12/01/1443AH.
The increasing number of companies and the intertwining of financial interests have led to these companies being exempt from criminal provisions. This prompted the Saudi regulator to stipulate strict penalties commensurate with the nature of the offense in Chapter Thirteen of the Companies Law.
Therefore, to clarify corporate crimes in Saudi Arabia, it is first necessary to ask what is meant by “corporate crimes” and then to examine the types of crimes and violations.
Definition of Corporate Crimes
The Companies Law (regulator) does not explicitly define corporate crimes. Any definition of corporate crimes would thus extend to cover offenses affecting various activities and domains. Accordingly, corporate crimes are found distributed across the Penal Code and certain specialized laws. In this study, however, the focus is on crimes specifically provided for under the Companies Law.
Corporate crimes can therefore be defined as any unlawful act or omission committed by a natural person in their capacity as a legal representative of the company, an employee, a counterparty, or any person appointed, delegated, or authorized to manage the company, which constitutes a violation of the Companies Law and its executive regulations governing the company at all stages, and which results in harm to the company and the national economy.
Types of Crimes and Violations Committed by Companies
Crimes and violations are divided into: major crimes, less serious crimes, and minor violations. Below, we will outline these crimes and the penalties stipulated by the regulator:
- Major or serious Crimes
- Crime of Providing False or Misleading Data or Information about the Company
The regulator considers any director, officer, board member, auditor, or liquidator who intentionally records false or misleading data or information in the company’s financial statements, reports, or in documents relating to capital reduction, sufficiency of assets to settle debts upon liquidation, or any other reports or statements presented to partners, the general assembly, or shareholders in accordance with the law—or who intentionally omits a material fact in any of the foregoing with the intent to misrepresent the company’s financial position as committing a major crime. This crime is punishable by imprisonment for a period not exceeding three years and a fine not exceeding 5,000,000 Saudi riyals, or by either of these two penalties (2).
Crime of Misusing Company Funds or Authority by a Company Officer Against the Company’s Interests for Personal or Direct/Indirect Gain
The regulator considers any manager, official, or board member who uses company funds, the powers they enjoy, or the votes they hold in that capacity, in a manner they know is against the company’s interests; to achieve personal purposes, to favor a company or individual, or to benefit from a project or transaction in which they have a direct or indirect interest; a serious crime punishable by imprisonment for a period not exceeding three years, a fine not exceeding 5,000,000 Saudi riyals, or one of these two penalties (3).
Less Serious Crimes
Article (261) of the Companies Law defines this type of crime and the penalties prescribed by the regulator. It states:
“Without prejudice to any penalty provided under another law, the following shall be punished with imprisonment for a period not exceeding one year, and/or a fine not exceeding SAR 1,000,000, or by either of these penalties:”
- Any auditor who fails to report to the company, through its responsible bodies or personnel, any violations discovered during their work that appear to be criminal offenses.
- Anyone who receives benefits or guarantees, or is promised them, in exchange for voting in a certain way or refraining from voting, in order to harm the company’s interests, and anyone who grants, guarantees, or promises such benefits.
- Anyone who announces, publishes or declares by any means, intending to mislead others into believing that a company has been registered when it has not completed its registration procedures with the commercial registry.
- Any public employee who discloses company secrets learned by virtue of their position to unauthorized parties.
- Anyone who, in order to collect share subscriptions or attract investors, publishes names of individuals falsely, claiming they are associated with the company or will be associated in any way.
- Anyone who decides to distribute, distributes, or receives profits or revenues in bad faith, contrary to the provisions of the law, the company’s founding contract, or its bylaws; including any auditor who becomes aware of such violations and fails to report them in their report.
- Anyone who exaggerates or submits false declarations or data from partners, shareholders, or others regarding the valuation of in-kind contributions, distribution of shares among partners, or fulfillment of their full value, whether at the company’s formation, capital increase, or modification of share distribution.
H – Any manager, official, board member, or auditor who fails to call a general meeting of partners or shareholders—or fails to take the necessary action, as the case may be when he learns that losses have reached the limits assessed in accordance with the provisions of Articles 132 and 182 of the Law.
- Any director, officer, board member, auditor or liquidator who exploits or discloses a company secret with the intent to harm the company.
- Anyone who intentionally obstructs those entitled by law to inspect the company’s documents, records, accounts, and papers, or causes such obstruction, or refuses to allow them to perform their duties.
- Any person appointed to inspect the company who intentionally records false facts in their reports or deliberately omits material facts that could affect the outcome of the inspection.
Violations
The regulator clarified in Article (262) of the Companies Law specifies violations punishable by a fine not exceeding five hundred thousand riyals (SR 500,000) as follows:
- Anyone who causes the delay or obstruction of convening the general assembly of partners or shareholders, or prevents a partner or shareholder from participating in any assembly, or from exercising voting rights associated with their shares, contrary to the provisions of the law.
- Anyone who fails to fulfill their duty to convene the general assembly of partners or shareholders within the period prescribed by law.
- Anyone who accepts appointment as a board member of a joint-stock company, or continues membership contrary to the provisions of the law, and any board member aware of such violations who does not object according to the law.
- Any board member of a joint-stock company who obtains a guarantee or loan from the company contrary to the law, and any board member aware of such violations who does not object according to the law.
- Anyone who fails to maintain proper accounting records and supporting documents to clarify the company’s activities and contracts, or fails to prepare financial statements in accordance with the accounting standards approved in the Kingdom or to file them as required by law.
- Anyone who neglects to provide the competent authority with the documents required under the law.
- Anyone who neglects to make the necessary documents accessible to partners or shareholders in accordance with the law.
- Anyone who neglects to prepare and record minutes of meetings according to legal requirements.
- Anyone who neglects to include any of the information required under Article 12 of the law.
- Anyone who accepts to perform, or continues performing, the duties of an auditor while knowing of reasons that legally prevent them from doing so.
- Anyone who neglects their duty to register the company with the commercial registry, or fails to register amendments to the company’s founding contract or bylaws as required by law.
- Anyone who intentionally provides false or non-compliant information in the company’s founding contract, bylaws, or other company documents, including incorporation requests and accompanying documents, and anyone who signs or files such documents with the commercial registry knowing their falsity.
- Any director or board member of a professional company who violates the regulations governing professional companies, or the conditions, controls, and general rules referred to in Article 200 of the law.
- Anyone who violates paragraph (2) of Article 202, and any director or board member of a professional company who violates Article 204 of the law.
- Any director, board member, or sole owner of a professional company practicing a free profession without a licensed partner or shareholder authorized to practice it.
- Any liquidator who fails to register their appointment, or the completion of liquidation, with the commercial registry according to the law.
- Anyone who neglects to take corrective measures to address violations after being notified of them as required by the law.
- Any auditor who fails to perform their duties as prescribed in the law.
- Any company or responsible official who fails to comply with the provisions of the law and regulations, or does not follow controls or decisions issued by the competent authority without providing a reasonable justification.
What specific law governs corporate activities and penalties in Saudi Arabia? The Kingdom issued the Companies Law under Royal Decree No. (M/132) dated 12/01/1443AH?
The specific legislation governing corporate activities and penalties in the Kingdom is the Companies Law, which was issued under Royal Decree No. (M/132) dated 12/01/1443AH. To ensure accountability and protect the national economy, the Saudi regulator established a framework of strict penalties within Chapter Thirteen of this law. These offenses are categorized into three distinct levels based on their severity: major crimes, less serious crimes, and minor violations.
Major crimes—such as intentionally recording false or misleading data in financial statements or the misuse of company funds by an officer for personal gain—carry severe penalties including imprisonment for up to three years and fines of up to 5,000,000 Saudi riyals. Less serious crimes, defined under Article 261, include actions like an auditor failing to report discovered crimes or the disclosure of company secrets, which are punishable by up to one year in prison and fines up to 1,000,000 Saudi riyals. Finally, administrative violations, such as failing to maintain proper accounting records or neglecting to convene the general assembly, can result in fines up to 500,000 Saudi riyals under Article 262.
How does the Saudi regulator define “corporate crimes”?
While the law does not explicitly define them, they are generally understood as unlawful acts or omissions committed by a legal representative, employee, or authorized manager that violate the Companies Law and result in harm to the company or the national economy.
The Saudi Companies Law (the regulator) does not provide an explicit definition for “corporate crimes”. Because there is no single statutory definition, these offenses often extend to cover various activities across the Penal Code and other specialized laws.
However, the sources offer a functional definition of corporate crimes as any unlawful act or omission committed by a natural person in their capacity as a:
- Legal representative of the company.
- Employee or counterparty.
- Person appointed, delegated, or authorized to manage the company.
For an action to be considered a corporate crime under this framework, it must constitute a violation of the Companies Law and its executive regulations at any stage of the company’s existence and result in harm to the company and the national economy. Rather than a single definition, the regulator instead focuses on categorizing these acts into major crimes, less serious crimes, and minor violations with specific associated penalties
Overview of Corporate Crimes
This document examines the legal framework and penal guidelines for corporate misconduct within the Kingdom of Saudi Arabia under Royal Decree No. (M/132). It defines corporate crimes as illegal actions or omissions by representatives or employees that harm the company’s welfare or the broader economy. The text categorizes these offenses into major crimes, such as financial fraud and embezzlement, less serious crimes involving secrecy and transparency failures, and minor violations regarding administrative duties. Each category is assigned specific penalties, ranging from significant fines to multi-year prison sentences, depending on the severity of the act. Ultimately, these regulations aim to ensure corporate accountability and protect the integrity of the nation’s evolving economic landscape.
Sources:
1) Professor Zadi Safia: Commercial Corporate Crimes, Master’s Thesis – 2016, Faculty of Law and Political Science, Department of Law, Lamine Debaghine University, p. A, published. Entry date: 12/3/2025 at 2:51 PM
2) Article 260/A of the Companies Law issued by Royal Decree No. (M/132) dated 12/01/1443 AH.
3) Article 260/B of the Companies Law issued by Royal Decree No. (M/132) dated 12/01/1443 AH.
4) Article 260/C of the Companies Law issued by Royal Decree No. (M/132) dated 12/01/1443 AH.
