Essential Data, Share Types, and the Rights Associated with Each Class

Introduction

Having explored the concept of the shareholder registry, its importance, and its regulatory framework in the previous article, we now examine its core components in detail. The registry is not merely a list of names; it is a complex document encompassing multiple data points about each shareholder, each class of shares they own, and the rights linked to each share class.

A precise understanding of the registry’s components is a fundamental requirement for everyone working in corporate governance, investor relations, and board secretariat. Any deficiency or error in this data may result in breaches of shareholder rights, disruption of company operations, or regulatory violations. We will review the mandatory data that must be included, the share types permitted under the Saudi system, and the rights associated with each type.

 

Part One: Essential Mandatory Data in the Shareholder Registry

The Saudi Companies Law and its Implementing Regulations specify the minimum data that must be included in the shareholder registry. However, good practice—particularly for listed companies and those seeking to attract investment—requires including additional data beyond this minimum to ensure operational efficiency and regulatory compliance.

1. Shareholder Identification Data

This data is the foundational element of the registry and varies according to the nature of the shareholder (natural or juridical person):

For Natural Persons

• Full four-part name as it appears on the official identity document.
• Nationality and national ID number, residency, or passport number.
• Date of birth.
• National address registered with the Saudi National Address.
• Mobile number and email for official communication.
• Marital status in certain cases (for legal necessity related to personal status).

For Juridical Persons

• Full name of the juridical entity as officially registered.
• Commercial registration number or legal license number.
• Country where the headquarters is located.
• Authorized legal representative’s information.
• Official correspondence address and contact information.
• Ultimate beneficial owner information in line with disclosure requirements.

2. Data of Shares Owned

This section documents the relationship between the shareholder and their shares and includes:

• Number of shares owned by each shareholder.
• Share type (ordinary, preferred, redeemable).
• Share class if multiple classes exist within the same type.
• Nominal value of the share (SAR 10 under the Saudi system).
• Paid-up value of the share (for shares not fully paid).
• Serial numbers of shares, if any.
• Date of acquisition.
• Source of acquisition (subscription, purchase, inheritance, gift, entitlement).

3. Changes and Restrictions Data

This data is recorded when any change occurs in share ownership or any restriction is imposed on disposition:

• Date of each ownership transfer.
• Information about the transferor and transferee.
• Ownership transfer instrument and its number.
• Pledge restrictions: pledgee’s data, secured debt value, ceiling.
• Attachment restrictions: attaching authority, decision number, date.
• Reservation and disposition prohibition entries, if any.

4. Shareholder Representation Data

• Information about agents, guardians, or trustees in cases of representation.
• Power of attorney or judicial decision data.
• Scope of the representative’s authority.
• Representation start and end dates.

📋 Regulatory Note Under the Implementing Regulations of the Companies Law, the data recorded in the registry must match the data in the original official documents and must be updated as soon as the company becomes aware of any change. Additionally, the shareholder must notify the company of any change in their personal data, address, or contact details.

 

Part Two: Share Types Under the Saudi System

Article 108 of the Saudi Companies Law stipulates that the shares a company may issue are divided into three main types: ordinary shares, preferred shares, and redeemable shares. The company’s bylaws may also stipulate different classes of each type, with certain rights or privileges or restrictions placed on some of these classes.

1. Ordinary (Common) Shares

Ordinary shares are the most common form and the foundation upon which capital ownership in joint-stock companies is built. Their holders enjoy a full bundle of rights embodying the legal status of a partner in the company.

Characteristics of Ordinary Shares

• Equal in nominal value, conferring equal rights and obligations on their holders.
• Tradable in accordance with regulatory and legal controls.
• May not be issued at less than their nominal value, but may be issued at a premium.
• Confer voting rights at general assemblies.
• Dividends are distributed after the distribution to preferred shareholders.

Rights of Ordinary Shareholders

1. The right to vote at general assemblies and participate in board member elections.
2. The right to receive a share of distributed profits.
3. The right of preemption in subscribing to new shares upon capital increases.
4. The right to review the company’s documents under regulatory controls.
5. The right to file liability claims against board members.
6. The right to a share of the company’s assets upon liquidation, after settlement of all debts.
7. The right to transfer ownership and dispose of shares per the law.

2. Preferred Shares

Preferred shares are a special type that grants holders rights and privileges beyond what ordinary shareholders receive, in exchange for relinquishing some other rights—typically the right to vote. The Saudi system regulates the issuance of these shares with specific controls to ensure that other shareholders’ rights are not harmed.

Controls on Issuing Preferred Shares

8. The company’s bylaws must permit their issuance.
9. The issued capital must be fully paid.
10. Approval from the extraordinary general assembly must be obtained.
11. Approval from a special assembly of affected shareholders, if any.
12. The combined percentage of preferred and redeemable shares must not exceed 50% of the capital.
13. The full value of preferred shares must be paid upon subscription.

Common Privileges of Preferred Shares

• Priority in receiving a specified percentage of profits before distribution to ordinary shareholders.
• Priority in receiving a share of the company’s assets upon liquidation.
• Guarantee of a fixed percentage of profits regardless of company performance (in some classes).
• Cumulative rights whereby undistributed profits are carried forward to subsequent years.

Common Restrictions on Preferred Shares

• Absence of voting rights at general assemblies (in most cases).
• Cap on the percentage of distributed profits (in the case of non-cumulative profits).
• Redeemability by the company at a specified date.

3. Redeemable Shares

These are shares issued by the company with the right to repurchase them from shareholders at a specified date or upon the occurrence of certain conditions. They are typically used as a flexible tool for raising capital with the possibility of later reduction.

Characteristics of Redeemable Shares

• Redemption conditions and mechanisms are specified in the company’s bylaws.
• Their full value must be paid upon subscription.
• They typically do not carry voting rights at general assemblies.
• They grant holders specified financial rights that may include dividend distributions.
• They are subject to the same 50% cap shared with preferred shares.

4. Treasury Shares

Treasury shares are shares that the company has purchased from the market and retains as treasury shares. The Saudi system permits this type of transaction with strict controls to protect shareholders and creditors.

Controls on Treasury Shares Under the Saudi System

14. The bylaws must permit it.
15. Treasury shares must not exceed 10% of the total class of shares subject to purchase.
16. The purpose of purchase must be either to reduce capital or to retain them as treasury shares.
17. They have no votes at general assemblies.
18. They are not entitled to dividend distributions while held by the company.

Common Uses of Treasury Shares

• Supporting share price during market downturns.
• Providing shares for employee incentive programs (restricted shares and stock options).
• Restructuring capital.
• Acquiring other companies through share exchanges.

 

Part Three: A Comprehensive Comparison Between Share Types

To clearly distinguish between different share types and understand the characteristics of each, we present the following comparison table:

Aspect	Ordinary Shares	Preferred Shares	Redeemable Shares
Voting Rights	Yes	Usually no	Usually no
Profit Priority	No	Yes	Per issuance terms
Profit Percentage	Variable	Usually fixed	Contractually defined
Liquidation Priority	Last	Advanced	Advanced
Redeemability	No	Per conditions	Yes
Capital Cap	No cap	50% (with redeemable)	50% (with preferred)
Issuance Approval	Extraordinary GA	Ext. GA + Special GA	Ext. GA + Special GA
Value Payment	Quarter at subscription	Full at subscription	Full at subscription

 

Part Four: Different Classes Within the Same Type

The Saudi system permits companies to issue different classes of the same type of shares, with each class distinguished by specific rights, privileges, or restrictions. This diversity opens broad horizons for companies to structure their capital to serve their strategic objectives.

Examples of Different Classes

Ordinary Share Classes

• Class A Shares: Carry multiplied voting rights, typically used to preserve founder control.
• Class B Shares: Normal voting rights, available to the public.
• Class C Shares: No voting rights but with full financial rights.

Preferred Share Classes

• Cumulative Preferred Shares: Undistributed profits accumulate to subsequent years.
• Non-Cumulative Preferred Shares: Undistributed profits do not carry forward.
• Participating Preferred Shares: Receive their fixed percentage plus a share of additional profits.
• Convertible Preferred Shares: Can be converted to ordinary shares under specified conditions.

💡 Practical Note The diversity of share classes requires an advanced electronic system for managing the shareholder registry, capable of tracking each class with its rights and restrictions independently. It also requires clear disclosure to investors of the differences between classes so they can make informed investment decisions.

 

Part Five: Rights Associated with Shares (In Detail)

Each share carries a bundle of associated rights that vary according to the share type, class, and the provisions of the company’s bylaws. We review below the basic rights in some detail:

1. Financial Rights

Right to Receive Profits

The shareholder is entitled to a portion of the net distributable profits for each fiscal year, proportional to the number and class of their shares. Entitled recipients are determined as of the record date set by the general assembly. The calculation methodology varies by share type: fixed for preferred shares and variable for ordinary shares.

Right of Preemption in Subscription

When the company’s capital is increased through the issuance of new shares for cash consideration, each shareholder registered in the registry at the end of the day on which the extraordinary general assembly is held is entitled to preemption rights proportional to their shareholding. The shareholder may subscribe to new shares or sell/assign preemption rights to others in accordance with regulatory controls.

Right to a Share in Company Assets Upon Liquidation

Upon liquidation, each shareholder is entitled to a share of the company’s assets after settlement of all debts, according to their share type and class. Priority goes to preferred shareholders, then to ordinary shareholders.

2. Non-Financial Rights

Voting Rights

Every voting shareholder has the right to attend general assembly meetings, or to designate a representative by written power of attorney, and to vote on resolutions according to their shareholding. Preferred shareholders are typically excluded unless the bylaws stipulate otherwise.

Right to Access and Information

The shareholder has the right to access the audited financial statements, the annual board report, the external auditor’s report, the company’s bylaws, and minutes of general assemblies. They also have the right to obtain copies of these documents under regulatory controls.

Right to Litigation and Review

• The right to file liability claims against board members for management errors.
• The right of shareholders holding 5% or more to request the appointment of an additional auditor.
• The right of shareholders holding 5% or more to request suspension of general assembly resolutions that violate the law.
• The right to demand inclusion of a matter on the agenda of the general assembly (for shareholders holding the specified percentage).

Right to Stand and Vote for Board Membership

The shareholder has the right to stand for board membership in accordance with regulatory controls and the requirements of the company’s bylaws. They also have the right to vote in board elections using the cumulative voting mechanism, which allows them to aggregate their votes on a single candidate or distribute them among several candidates.

 

Part Six: Shareholder Obligations Toward the Company

In exchange for the rights enjoyed by the shareholder, several obligations are imposed that must be recorded and tracked within the framework of the shareholder registry:

19. Payment of the value of subscribed shares according to specified deadlines (for shares not fully paid).
20. Disclosure of correct data to the company and updating it as soon as it changes.
21. Compliance with general assembly resolutions issued in accordance with the law.
22. Respect for the provisions of the company’s bylaws.
23. Avoiding the use of inside information to obtain illegitimate benefits.
24. Disclosure of ownership upon exceeding specified thresholds (5%, 10%, 20%, etc.) in listed companies.

 

Part Seven: Registry Components Checklist

Below is a practical checklist for verifying the completeness of shareholder registry components:

Identification Data

• Full name matches the identity document.
• National ID / Commercial Registration number is complete and correct.
• Nationality is accurately recorded.
• National address is registered and updated.
• Contact data (mobile, email) is correct and active.

Share Data

• Number of shares matches official documents.
• Share type and class clearly identified.
• Nominal and paid-up values documented.
• Date and source of acquisition identified.

Restrictions and Changes

• Date of each ownership change documented.
• Ownership transfer instrument preserved and referenced.
• Pledges and attachments recorded with full details.
• Representation and proxy data documented, if any.

Regulatory Compliance

• All mandatory data per the law is recorded.
• Updates take place within regulatory deadlines.
• Periodic disclosures are extracted accurately from the registry.
• Compliance with the Personal Data Protection Law.

 

Conclusion and Key Takeaways

The shareholder registry is a complex information structure encompassing multidimensional data about shareholders, their shares, their rights, and their restrictions. Efficient management requires a deep understanding of the different share types—ordinary, preferred, redeemable, and treasury—and the rights and obligations associated with each, supported by advanced electronic mechanisms to manage this diversity.

Commitment to data accuracy and comprehensiveness is not merely a regulatory requirement; it is a pillar for building trust between the company and its shareholders, for enabling each shareholder to exercise their rights effectively, and for ensuring the company’s compliance with disclosure and transparency requirements before regulatory authorities.

🎯 Core Takeaways 1) Mandatory registry data includes: identification data, share data, changes and restrictions, and representation data. 2) Share types under the Saudi system: ordinary, preferred, redeemable, plus treasury shares. 3) The combined percentage of preferred and redeemable shares does not exceed 50% of capital. 4) Treasury shares do not exceed 10% of the share class subject to purchase. 5) Each share type carries a specific bundle of financial and non-financial rights and obligations.

FAQ

What types of shares may a Saudi joint-stock company issue?

Article 108 of the Saudi Companies Law issued by Royal Decree No. (M/132) permits three main types of shares. Ordinary shares are the most common, granting holders voting rights and full participation in ownership. Preferred shares provide priority in profit distributions and liquidation proceeds, typically in exchange for waiving voting rights. Redeemable shares give the company the right to repurchase them at a specified date or upon the occurrence of defined conditions. Additionally, the company may retain repurchased shares as treasury shares, subject to strict controls.

What is the difference between ordinary and preferred shares in Saudi Arabia?

The two types differ across four key dimensions. Ordinary shares grant voting rights at general assemblies, offer a variable share of profits with no priority, and rank last in liquidation. Preferred shares, by contrast, generally carry no voting rights but offer a fixed priority return on profits and advanced standing in liquidation. Under the Saudi system, preferred and redeemable shares combined cannot exceed 50% of the company's capital, and their full value must be paid at subscription—unlike ordinary shares, where only a quarter of the value is required at subscription.

What are treasury shares and what limits apply to them under Saudi law?

Treasury shares are shares that a company buys back from the market and retains. The Saudi Companies Law permits this with four strict controls: the company's bylaws must explicitly allow it; treasury shares must not exceed 10% of the total class of shares being repurchased; the purpose must be either capital reduction or retention as treasury shares; and treasury shares carry no voting rights and receive no dividend distributions while held by the company. Common uses include supporting the share price during downturns, funding employee incentive programs, and facilitating capital restructuring.

What mandatory data must be recorded for each shareholder?

The Implementing Regulations of the Saudi Companies Law require four categories of data. Identification data covers the full legal name, ID number or commercial registration, nationality, registered national address, and contact details. Share data covers the number of shares owned, their type and class, nominal and paid-up values, and the date and source of acquisition. Restriction data records any pledge or attachment with its full details. Representation data documents proxy, guardianship, or trustee arrangements where applicable. All entries must precisely match the original official documents.

What controls govern the issuance of preferred shares in Saudi Arabia?

Six conditions must be met before a company may issue preferred shares. The company's bylaws must permit their issuance. The issued capital must be fully paid up. The extraordinary general assembly must approve the issuance. A special assembly of any shareholders whose rights may be affected must also approve it. The full value of preferred shares must be paid upon subscription. And the combined proportion of preferred and redeemable shares must not exceed 50% of the company's capital.

 

References and Sources

• Article (108) of the Saudi Companies Law – Types of Shares.
• Article (114) of the Saudi Companies Law – Treasury Shares.
• Article (51) of the Implementing Regulations of the Companies Law – Controls on Issuing Preferred Shares.
• Article (34) of the Implementing Regulations of the Companies Law – Controls on Treasury Shares.
• Article (106) of the Companies Law – Cash and In-Kind Contributions.
• The Corporate Governance Regulations, Saudi Capital Market Authority.
• OECD Guiding Principles on Shareholder Rights.