Insights
Corporate Governance Under the Saudi Companies Law: Board Charters, Reserved Matters, and Delegation of Authority
A general, educational overview of how corporate governance is structured under the Saudi Companies Law, focusing on the building blocks that boards typically use: charters, reserved matters, and delegated authority.
Key takeaways
- Corporate governance under the Saudi Companies Law (Royal Decree No. M/132 (1443 AH)) allocates authority across shareholders, the board, and management through the Law and a company's constitutional documents.
- A board charter is an internal document that records how the board organises its work; it is a practical governance tool rather than a statutory form.
- Reserved matters are decisions a company keeps at board or shareholder level, marking the boundary between oversight and management discretion.
- Delegation of authority empowers management within defined limits through documented authorisations such as board resolutions and a delegation matrix.
- Governance frameworks are typically designed alongside disclosure obligations (Ministry of Commerce, and the CMA for listed companies) and data-protection duties under the PDPL.
Corporate governance describes how authority, accountability, and oversight are allocated within a company. Under the Saudi framework, that allocation is anchored in the Companies Law (issued by Royal Decree No. M/132 (1443 AH) and administered by the Ministry of Commerce), a company's constitutional documents, and — for companies in regulated markets — additional supervisory regulations. This article explains, in general terms, three practical instruments boards commonly rely on. It is general educational information published by Pactis and is not legal advice.
The governance framework: where authority comes from
Under the Saudi Companies Law, a company's governance generally flows from a layered set of sources: the Law itself, the company's constitutional documents (the articles of association or bylaws), and the resolutions of its governing bodies. The framework typically distinguishes between matters reserved to shareholders in general assembly and matters entrusted to the board and management. For companies whose securities are listed, the Capital Market Authority's Corporate Governance Regulations add a further layer of expectations regarding board composition, committees, and disclosure.
Board charters: documenting how the board operates
A board charter is an internal governance document that sets out, in writing, how a board organises its own work — its mandate, the conduct of meetings, the role of the chair, and the committees it establishes. While companies adopt charters to give effect to the responsibilities the Companies Law and their own bylaws place on the board, the charter itself is a practical tool rather than a statutory form. Boards generally use it to make accountability explicit and to align their internal practice with the constitutional documents and any applicable supervisory regulations.
Reserved matters: decisions the board keeps to itself
Reserved matters are the categories of decision that a company chooses to keep at board or shareholder level rather than delegating downward — for example, significant transactions, related-party dealings, or changes that affect the company's structure or capital. The Companies Law and a company's bylaws shape which decisions must sit with the general assembly or the board, and companies typically supplement this with their own reserved-matters list. Defining these matters clearly is a common governance practice because it sets the boundary between board oversight and management discretion.
Delegation of authority: empowering management within limits
Delegation of authority is the mechanism by which a board entrusts defined powers to executives and committees so the company can operate efficiently, while retaining oversight of the most consequential decisions. Under the Saudi framework, delegation is generally exercised through documented authorisations — such as board resolutions and a delegation-of-authority matrix — that specify who may bind the company, within what limits, and subject to what approvals. Clear, written delegation helps ensure that authority is traceable and that actions taken on the company's behalf rest on a proper internal basis.
Governance, disclosure, and data obligations
Governance does not operate in isolation from a company's other obligations. Depending on the company's form and market, it may be subject to disclosure and reporting expectations administered by the Ministry of Commerce and, for listed entities, the Capital Market Authority. Where governance processes involve personal data — for example, board and shareholder records — companies generally also consider the Personal Data Protection Law (PDPL), which governs how personal data is handled in the Kingdom. Sound governance frameworks are typically designed with these adjacent obligations in view.
Sources referenced
- Companies Law (Royal Decree No. M/132 (1443 AH))
- Ministry of Commerce (administering authority for the Companies Law)
- CMA Corporate Governance Regulations (for listed joint-stock companies)
- Personal Data Protection Law / PDPL (Royal Decree No. M/19)
This is general information published by Pactis, not legal advice. Laws and regulations change; verify the current position and obtain specific advice before acting on anything here.