ARTICLES & UPDATES

Delisting a company does not exempt it from penalties stipulated under the Capital Markets Law and its Executive Regulations in case of violations or non-compliance with the relevant laws and regulations. While the company may be removed from trading and regular public disclosure, it remains subject to the oversight of the CMA regarding shareholder rights protection, law enforcement, governance matters, and investigations preceding the delisting. The board of directors remains responsible for violations that occurred before delisting, as well as for liabilities to shareholders and third parties for any breach of the law or the company’s articles of association, including compensation to shareholders, the company, or others.

After delisting, the company’s shares are no longer tradable on the stock exchange. This affects shareholders by limiting their ability to trade shares, potentially missing market opportunities, and impacting their portfolio management. Transparency is reduced compared to when the company was under CMA oversight, moving from regular public disclosure to disclosure in accordance with the Companies Law, such as in general assembly meetings, financial statements, and auditor reports. Delisting often weakens minority shareholder protection due to reduced access to information.

However, as noted above, delisting does not prevent shareholders from exercising oversight. Shareholders retain the right to attend general assembly meetings and review and discuss the board of directors’ reports and the financial statements.

The chairman and board members are responsible toward the company, shareholders, and third parties for any fraud, abuse of authority, violations of the law or company articles, or mismanagement. The approval of the board by a general assembly vote does not prevent shareholders from filing liability claims. The company or any shareholder may file a claim for compensation if they have suffered damage due to errors, in addition to the right to remove the chairman or one or more board members, dissolve the board, and elect a new board based on a proposal submitted by shareholders holding at least one-quarter of the company’s issued capital.

Each shareholder, regardless of the number of shares held, has the right to challenge any decision by the board or general assembly that violates the law, the company’s articles, or is intended to harm the company’s interests. It is also possible to challenge ordinary and extraordinary general assembly decisions that infringe on minority rights. Shareholders representing at least 5% of the company’s capital may request the Ministry of Commerce to appoint an auditor to inspect the company regarding any violations committed by the directors, board members, auditor, or CEO, provided they have reasonable grounds. If the Ministry rejects the shareholders’ request, they may submit a petition to the Chief Court to order the requested inspection.

In conclusion, even if a company evades CMA oversight by not cooperating with its decisions and regulations, the company’s management remains under the law’s scrutiny and liable for any unlawful acts, provided that shareholders exercise the rights granted to them by law.

This article was recently published in Arabic in Al-Jarida newspaper. You can view the original newspaper clipping here-https://www.aljarida.com/article/121398 

Lawyer / Abdulrazzaq Abdullah E-mail: azq@arazzaqlaw.com