Saudi CMA Amends Rules on Board Member Removal and Profit Distribution

On April 2, 2026, the Saudi Capital Market Authority (CMA) approved amendments to the Implementing Regulation of the Companies Law for Listed Joint Stock Companies (the Amended Implementing Regulations).The Implementing Regulation of the Companies Law for Listed Joint Stock Companies issued by the board of the Capital Market Authority pursuant to resolution No. 8-127-2016 dated 16/01/1438H. (corresponding to October 17, 2016), as amended by resolution of the board of the Capital Market Authority No. 3-44-2026 dated 11/10/1447H. (corresponding to March 30, 2026). The amendments focus on two areas: (i) establishing controls and procedures governing the removal of board members by the ordinary general assembly, including the process for shareholder-initiated removal requests, board continuity, notification obligations, and restrictions on re-nomination; and (ii) enhancing the framework for determining distributable profits and distributing interim dividends.

Overview of the Amendments

Controls and Procedures Governing the Removal of Board Members by the General Assembly

Under the Amended Implementing Regulations, one or more shareholders holding no less than 10% of the company’s voting shares may submit a request for the removal of board members through the ordinary general assembly, in accordance with the Companies Law. 

For the purpose of a request for removal of board member(s), the applicant must demonstrate that the relevant member(s) are unable to perform their duties as prescribed by law. Grounds for demonstrating inability include, but are not limited to, cases where the member has failed to attend three consecutive or five non-consecutive board meetings during the term of membership, where the member has been convicted of a crime involving breach of trust, or where a decision has been issued by a competent authority that affects the member’s ability to perform their duties.

If the request seeks removal of all board members, it may not be submitted until at least six months have elapsed from the commencement of the board’s term.

Board Obligations Upon Receiving a Removal Request

Upon receiving a valid removal request, the board must: (i) immediately notify the concerned member of the request, and (ii) announce the removal request — after verifying that it meets the applicable requirements — in the notice calling for the convening of the ordinary general assembly. The notice must include the name of the shareholder(s) who submitted the request and the justifications for it. The concerned board member has the right to prepare a written statement to be made available to shareholders upon publication of the notice, and to make a statement at the relevant ordinary general assembly meeting.

Board Member Notification Obligations

A board member must immediately and without delay notify the board upon the issuance of (i) a judgment convicting the member of a crime involving breach of trust, or (ii) a decision by a competent authority in accordance with the relevant laws that affects the member’s ability to perform their duties. The board must, upon becoming aware of the issuance of a final judicial judgment or competent authority decision of such nature, submit a recommendation to the ordinary general assembly for the removal of the concerned member, independently of any notification obligation of the member.

Board Continuity and Transitional Measures

Where the removal of all or some board members would result in the number of members falling below the minimum required under the Companies Law or the company’s bylaws, the resolution of the ordinary general assembly approving the removal must provide that the removal shall not take effect until after the election of a new board or a replacement member, as applicable. The board must take all necessary measures to convene the ordinary general assembly to elect a new board or replacement member within a period not exceeding 75 days from the date of the ordinary general assembly’s approval of the removal request.

Re-Nomination Restriction

A person who has been removed from the board of a company, or who has resigned from the board after receiving a removal request and prior to the convening of the ordinary general assembly to vote thereon, may not be re-nominated for membership of the board of the same company until the end of the term of the board from which they were removed or resigned.

Increased Flexibility in the Determination and Distribution of Profits

Distributable profits were previously tied to “net income of the financial year,” and interim dividend calculations required audited financial statements. The Amended Implementing Regulations remove both restrictions. Distributable profits are now based on “net income” generally, and companies may rely on the latest reviewed or audited financial statements when calculating distributable profits for interim dividend purposes. In practice, this means listed companies can use their most recent interim reviewed financial statements (not only annual audited statements) as a basis for distributing interim dividends. 

Practical Implications

Boards of directors of listed companies will need to review their internal governance frameworks and procedures to ensure alignment with the new requirements, including establishing clear processes for receiving and handling shareholder removal requests, ensuring compliance with the 75-day timeline for convening the ordinary general assembly to elect replacement members, and verifying that their board compositions satisfy the minimum membership requirements under the Companies Law and the company’s bylaws. Board members should also familiarize themselves with their individual notification obligations.

At the company level, listed companies should review their bylaws and internal policies to ensure consistency with the amendments, particularly with respect to board member removal procedures, and consider updating their dividend and profit distribution policies to take advantage of the increased flexibility afforded by the amended framework.

Shareholders holding 10% or more of the company’s voting shares should be aware of the rights and procedural requirements available to them under the Amended Implementing Regulations.

Listed companies should also note the re-nomination restriction under the Amended Implementing Regulations, which prevents a removed or resigned board member from being re-nominated to the same company’s board until the end of the term from which they were removed or resigned. Companies should factor this restriction into their succession planning and nomination processes.

Conclusion

The amendments mark a significant step in the CMA’s ongoing development of the regulatory and governance framework applicable to listed joint stock companies in Saudi Arabia. By introducing clear controls on the removal of board members and greater flexibility in determining distributable profits, the amendments are intended to enhance corporate governance, protect shareholder rights, and support the continued growth and sustainability of the Saudi capital market.

This Client Alert was prepared with the assistance of Naif AlMeleihi in the Riyadh office of Latham & Watkins.