General Assemblies of Joint-Stock Companies

Concept, Types, Importance, and Role in Corporate Governance

Introduction

The General Assembly is the supreme authority within a joint-stock company. It is the forum that brings together all shareholders—regardless of the size of their holdings—to express their collective will on the company’s major affairs. Through this assembly, decisive resolutions are taken that shape the company’s trajectory: from approving the financial statements, to electing the Board of Directors, to amending the articles of association, to authorizing mergers, acquisitions, and dissolution.

Under the new Saudi Companies Law issued by Royal Decree No. (M/132), the provisions governing General Assemblies have undergone substantial development that reflects the broader economic transformation the Kingdom is experiencing under Vision 2030. Assemblies have become more flexible, less procedurally complex, and more open to modern technology, while maintaining stringent standards for protecting shareholder rights.

This article—the first in an integrated series on General Assembly Management—addresses the foundational concepts: what a General Assembly is, its types, its importance, who is entitled to attend, the substantive differences between its various forms, and where the General Assembly sits within the broader hierarchy of corporate governance.

First: Defining the General Assembly

Legal Definition

The General Assembly is the meeting of shareholders of a joint-stock company, convened in accordance with the provisions of the Companies Law and the company’s articles of association, to deliberate on matters relating to the company and adopt resolutions thereon. Its resolutions are binding on all shareholders—whether they attended or not, and whether they voted in favor or against.

Functional Definition

From a functional perspective, the General Assembly can be understood as:

• The Supreme Authority: The highest legislative and supervisory authority within the company, ranking above the Board of Directors and executive management.
• The Democratic Instrument: The mechanism through which shareholders collectively and systematically exercise their rights in the company’s affairs.
• The Oversight Body: The organ that holds the Board of Directors accountable for its performance and evaluates its annual results.
• The Binding Framework: Its resolutions are legally binding on all shareholders and on management alike.

Essential Elements of a Valid Assembly

For a meeting to qualify as a legally valid General Assembly, several core elements must be present:

• Formal Notice: Issuance of a notice of meeting by the competent authority (typically the Board of Directors) in accordance with statutory procedures.
• Legal Quorum: Presence of the required proportion of shareholders or their authorized representatives.
• Agenda: Advance specification of the items to be discussed and voted upon.
• Voting: Exercise of voting rights by shareholders through orderly procedures.
• Minutes: Formal documentation of the deliberations and resolutions adopted.

Second: The Importance of the General Assembly

The General Assembly derives its significance from being the organ that embodies democracy in corporate management and that balances the interests of the various stakeholders. Its importance can be examined from multiple angles:

1. Legal Importance

The resolutions of the General Assembly serve as a source of rights and obligations within the company. Through it:

• The articles of association are adopted and amended.
• The financial statements are approved and the directors are discharged from liability.
• Directors and external auditors are appointed and removed.
• Dividend distribution policies are determined.
• Decisions on mergers, acquisitions, and dissolution are taken.

2. Governance Importance

The Assembly is the primary instrument for applying the principles of sound corporate governance:

• It achieves accountability—holding management to account for its performance.
• It enhances transparency—making information available to shareholders.
• It ensures fairness—equal treatment among shareholders.
• It clarifies responsibility—delineating the duties of each party.

3. Economic Importance

Assembly resolutions have profound economic consequences for:

• The company’s share price in the market.
• The company’s attractiveness to investors.
• The cost of capital.
• The company’s relationships with partners and clients.
• The company’s credit rating.

4. Social Importance

Assemblies have social dimensions that are sometimes overlooked:

• They achieve participation—enabling shareholders to contribute to decision-making.
• They build trust—of shareholders, investors, and the public in the company.
• They strengthen belonging—shareholders’ sense of ownership and connection to the company.
• They contribute to financial literacy—educating the public on investment matters.

💡  Key Insight Empirical studies consistently show that companies which take General Assembly management seriously—through advance communication, transparent disclosure, ease of participation, and clarity of resolutions—achieve higher investment returns and better market valuations than companies that treat the Assembly as a procedural formality.

Third: Types of Assemblies in Joint-Stock Companies

Under the new Saudi Companies Law and its implementing regulations, shareholder assemblies in a joint-stock company fall into two principal categories: General Assemblies and Special Assemblies. General Assemblies are further divided into Ordinary and Extraordinary. Each type has its own competencies and governing rules, examined in detail below.

1. The Ordinary General Assembly (OGA)

Definition and Characteristics

The Ordinary General Assembly is the assembly convened periodically—at least once a year—to consider routine matters relating to the company’s ongoing operations. Its resolutions do not require special majorities or elevated quorums.

Timing of Convocation

Pursuant to Article (88) of the new Companies Law, the Annual Ordinary General Assembly must be held at least once during the six months following the end of the company’s financial year. Additional Ordinary General Assemblies may be convened whenever necessary. A notable evolution: the requirement for the annual Ordinary Assembly is now also satisfied by holding an Extraordinary General Assembly within the same six-month window—reflecting the new flexibility built into the law.

Principal Competencies

• Reviewing the Board of Directors’ report on the company’s activities and financial position.
• Discussing the external auditor’s report and approving the financial statements.
• Deciding on the Board’s recommendations regarding dividend distribution.
• Electing directors, determining their remuneration, and removing them when warranted.
• Appointing the external auditor and setting their fees.
• Discharging the directors from liability.
• Approving transactions and contracts in which a director has an interest.
• Approving the issuance of sukuk or debt instruments.

Legal Quorum

Under Article (92) of the new law:

• First Meeting: The Ordinary General Assembly is validly convened only if shareholders representing at least one-quarter of the shares are present, unless the articles of association specify a higher proportion not exceeding one-half.
• Second Meeting: If the quorum is not met, the Assembly reconvenes one hour after the end of the period set for the first meeting and is deemed valid regardless of the number of shares represented.

Majority Required for Resolutions

Resolutions of the Ordinary General Assembly are passed by an absolute majority of the shares represented at the meeting—that is, more than 50% of the votes present.

2. The Extraordinary General Assembly (EGA)

Definition and Characteristics

The Extraordinary General Assembly is convened to deliberate on fundamental and non-routine matters that affect the company’s structure and corporate existence. Its resolutions require an elevated quorum and a special majority.

Timing of Convocation

The Extraordinary General Assembly has no fixed timetable; it is convened whenever circumstances require. The Board of Directors must call one in specific situations, including:

• Upon the request of the external auditor (within 30 days).
• Upon the request of shareholders representing 10% of the voting shares.
• In the event of substantial losses (where losses reach half of the share capital or more).

Principal Competencies (Article 85 of the Law)

• Amending the company’s articles of association (subject to certain protected rights).
• Increasing or reducing the share capital.
• Converting the company from one legal form to another.
• Mergers or demergers.
• Issuance of preferred or redeemable shares.
• Buy-back of the company’s own shares (treasury shares).
• Share splits or share consolidations.
• Extending the company’s term or dissolving it before expiry.
• Approving the sale of material assets of the company.

Legal Quorum

Under Article (93) of the law:

• First Meeting: Presence of at least half of the voting shares, unless the articles specify a higher proportion.
• Second Meeting: If the quorum is not met, the Assembly reconvenes one hour after the end of the period set for the first meeting and is deemed valid with the presence of at least one-quarter of the shares.
• Third Meeting: If quorum is still not achieved at the second meeting, a third meeting is convened—following a fresh statutory notice—and is valid regardless of the number of shareholders present.

Majority Required for Resolutions

Resolutions of the Extraordinary General Assembly are passed by a two-thirds majority of the shares represented. For fundamental resolutions—such as increasing or reducing capital, dissolving the company, or changing its purpose—the required majority is three-quarters of the shares represented.

3. The Special Assembly

Definition and Characteristics

The Special Assembly is a meeting that brings together a particular class of shareholders—typically holders of a specific class of shares—to deliberate on matters that concern that class alone. The new Companies Law has codified this Assembly in Article (89) to protect the rights of different share classes.

When It Is Convened

• When amending the rights attached to a particular class of shares (for example, modifying the rights of preferred shares).
• When issuing preferred or redeemable shares that may affect a specific class.
• When converting one class of shares into another.
• When taking decisions that affect the rights of a particular class (such as liquidation or converting preferred into ordinary shares).
• In cases stipulated by the company’s articles of association.

A Special Right for Preferred Shareholders

Under the implementing regulations, if the company fails to pay the prescribed share of net profits to preferred shareholders for three consecutive years, the Special Assembly of preferred shareholders may resolve that they shall attend the General Assembly meetings and participate in voting until the company has paid all the profits allocated for those years.

Fourth: Comprehensive Comparison Between Assembly Types

The following table sets out a clear comparison between the three types of assemblies:

Aspect	Ordinary General Assembly	Extraordinary General Assembly	Special Assembly
Timing	Annually (at least once)	Whenever required	Whenever required
First Quorum	One-quarter of shares	One-half of shares	Based on the class
Second Quorum	Any number after one hour	One-quarter after one hour	Per the articles
Resolution Majority	Absolute majority (>50%)	Two-thirds of votes	Per the class
Fundamental Resolutions	—	Three-quarters of votes	—
Competencies	Routine, annual matters	Amending the articles and structural decisions	Matters affecting a class
Convening Authority	Board of Directors	Board of Directors (with exceptional cases)	Board or the relevant class

Fifth: The Right to Attend and Vote

The Companies Law and the company’s articles of association regulate who is entitled to attend General Assemblies and vote therein. This right is among the fundamental rights of the shareholder, which cannot be lawfully waived or unduly restricted.

General Rule: Every Shareholder’s Right to Attend

As a matter of principle, every shareholder—regardless of the number of shares held—has the right to attend the General Assemblies. The articles of association may impose reasonable conditions, provided that they do not deprive any shareholder of this fundamental right.

Attendance in Person

This refers to the shareholder’s personal attendance, voting directly with their shares. In the digital era, this includes:

• Physical attendance at the venue.
• Virtual attendance through approved electronic platforms.
• Advance electronic voting (which must be available for no less than three days before the meeting).

Attendance by Proxy

A shareholder may authorize another person to attend the Assembly and vote on their behalf, subject to the following controls:

• The proxy must be in writing.
• The proxy holder must not, as a general rule, be a director or employee of the company.
• The proxy must specify the relevant Assembly and the scope of the authorization with clarity.
• The proxy must be documented in accordance with the company’s approved procedures.

Shareholders Restricted from Voting

In specific circumstances, certain shareholders are barred from voting on particular items:

• A director cannot vote on resolutions concerning their own discharge from liability or the determination of their remuneration.
• A party with an interest in a contract submitted to the Assembly cannot vote on that contract.
• Preferred shareholders generally do not vote in General Assemblies (subject to exceptions).
• Treasury shares carry no voting rights.

Sixth: The Assembly’s Place in the Governance Hierarchy

To understand the General Assembly correctly, it must be viewed within the company’s full governance structure. The following explains this hierarchy and where the Assembly sits within it.

The Corporate Governance Pyramid

1. The Base: Shareholders

Shareholders are the company’s actual owners. They hold the shares and exercise their authority through the General Assemblies.

2. The Supreme Authority: The General Assembly

The organ that embodies the shareholders’ will and takes decisive resolutions. It is divided into Ordinary, Extraordinary, and Special Assemblies.

3. The Strategic Executive Authority: The Board of Directors

Elected by the shareholders in the General Assembly. The Board oversees the strategic direction of the company and is accountable to the Assembly.

4. Board Committees

The Audit Committee, the Nomination and Remuneration Committee, the Risk Committee, and others. Each specializes in a defined area of oversight.

5. Day-to-Day Executive Authority: Executive Management

Appointed by the Board of Directors, executive management is responsible for the daily operations of the company and the implementation of strategies and policies.

6. Employees and Staff

They execute day-to-day directives and contribute to achieving the company’s objectives.

Relationships Between Levels

Higher Level		Lower Level	Nature of the Relationship
Shareholders		General Assembly	The Assembly represents and gives effect to shareholders’ will
General Assembly		Board of Directors	Elects, evaluates, holds accountable, and discharges
Board of Directors		Committees	Forms them, defines their mandates, and oversees them
Board of Directors		Executive Management	Appoints, sets policies, and evaluates performance
Executive Management		Employees	Manages, motivates, and evaluates performance
	🎯  The Key to Understanding The General Assembly is not a ‘meeting’ in the conventional administrative sense; it is the supreme authority from which all other corporate powers derive their legitimacy. The Board derives its mandate from the Assembly, and executive management derives its mandate from the Board. This chain of legitimacy begins with the shareholders and reaches every employee in the company.

Seventh: Recent Developments in General Assemblies

General Assemblies have undergone significant developments in recent years, particularly with digital transformation and Saudi Vision 2030. The most notable include:

1. Virtual and Hybrid Assemblies

Following the COVID-19 pandemic, virtual assemblies have become legally recognized in many jurisdictions. The new Saudi law permits:

• Holding assemblies entirely through electronic platforms.
• Hybrid assemblies (combining physical and virtual attendance).
• Advance and real-time electronic voting.
• Live broadcasting of assemblies to shareholders unable to attend in person.

2. Advance Electronic Voting

Pursuant to the implementing regulations, electronic voting on agenda items must open after the publication of the notice, and must be available for no less than three days before the date of the Assembly. Electronic voting on an item closes once the item has been discussed and voted upon at the Assembly itself.

3. Facilitating Participation

Modern legislation has moved decisively toward facilitating the participation of minority shareholders and retail investors:

• Abolishing minimum-shareholding requirements for attendance.
• Providing multiple electronic channels for participation.
• Making documents available electronically well in advance of the Assembly.
• Developing electronic proxy mechanisms.

4. Greater Transparency

• Mandating publication of Assembly details on the ‘Tadawul’ platform.
• Advance disclosure of the agenda and related documents.
• Publishing detailed voting results following the Assembly.
• Disclosing any conflicts of interest.

5. Cybersecurity

With digital transformation, cybersecurity has become a central concern in Assembly management:

• Protecting shareholder and voting data from breaches.
• Ensuring the integrity of electronic voting operations.
• Verifying the identity of participants.
• Complying with the Personal Data Protection Law.

Eighth: Common Challenges in Assembly Management

Despite legislative and technological progress, companies still face multiple challenges in managing their General Assemblies:

1. Low Participation

The Challenge: Many shareholders—especially retail investors—do not attend assemblies, which affects the legitimacy of resolutions and the extent to which they reflect the will of the full shareholder base.

Causes: Lack of awareness of rights, procedural complexity, the small shareholder’s sense that their influence is negligible, and the geographic dispersion of shareholders.

2. Procedural Complexity

The Challenge: Notice, registration, and voting procedures can be so complex that they discourage shareholders from participating.

3. The Information Gap

The Challenge: When sufficient information does not reach shareholders before the Assembly, they cannot make informed decisions.

4. Formal-Only Assemblies

The Challenge: In some cases, assemblies are run as a formality—decisions have been taken in advance, and the discussion is purely cosmetic.

5. Conflicts of Interest

The Challenge: Conflicts of interest can emerge between major and minority shareholders, or between management and the shareholder base.

6. Technical Challenges

The Challenge: In virtual assemblies, technical problems can arise that affect the integrity of the proceedings.

Ninth: Best Practices in Assembly Management

Leading companies distinguish themselves through advanced practices in managing their General Assemblies:

• Early Planning: Begin preparation well in advance of the Assembly (no less than 6–8 weeks).
• Effective Communication: Use multiple channels to engage with shareholders before, during, and after the Assembly.
• Full Transparency: Publish all relevant documents sufficiently ahead of the Assembly.
• Plain Language: Draft the agenda and resolutions in language accessible to non-specialists.
• Ease of Attendance: Offer multiple attendance options (physical, virtual, proxy, advance electronic voting).
• Space for Discussion: Allocate sufficient time for questions and deliberation before voting.
• Secret Ballot: Where appropriate, enable secret voting to protect shareholders.
• Rigorous Documentation: Comprehensive minutes capturing the proceedings and detailed voting outcomes.
• Post-Assembly Follow-up: Send a summary of outcomes and resolutions to shareholders.
• Evaluation and Improvement: Review each Assembly to identify opportunities for improving the next one.

Conclusion and Key Takeaways

The General Assembly is the nerve center of corporate governance in a joint-stock company—the organ that embodies democracy in the company’s management. Through it, shareholders exercise their collective rights and hold management accountable for its performance. With the legislative evolution in Saudi Arabia—particularly under the new Companies Law—assemblies have become more flexible and more open to modern technology, while preserving strict controls to safeguard shareholder rights.

Success in managing assemblies is not measured merely by compliance with statutory requirements; it is measured by the extent to which an assembly delivers its real objectives: enabling shareholders to participate meaningfully, supporting informed decision-making, enhancing transparency and trust, and building a sustainable relationship between the company and its owners. This requires an integrated vision that combines legal compliance, operational excellence, and genuine respect for the shareholders’ will.

🎯  Essential Points to Remember (1) The General Assembly is the supreme authority in a joint-stock company and the shareholders’ primary democratic instrument. (2) It is divided into: Ordinary (routine matters), Extraordinary (fundamental decisions), and Special (specific share classes). (3) The first-meeting quorum is one-quarter of shares for OGA and one-half for EGA. (4) OGA resolutions require an absolute majority, EGA resolutions require two-thirds, and fundamental resolutions require three-quarters. (5) The right to attend is a fundamental right of every shareholder, exercised in person or by proxy. (6) Digital transformation has opened new horizons for virtual assemblies and electronic voting.

FAQ

What are the types of general assemblies in Saudi joint-stock companies and what does each one decide?

Saudi Companies Law M/132 establishes three types of assemblies. The Ordinary General Assembly (OGA) meets at least once annually within six months of the financial year-end and handles routine matters including approving financial statements, electing board members, appointing the external auditor, distributing dividends, and discharging directors from liability. The Extraordinary General Assembly (EGA) convenes whenever needed for fundamental decisions requiring elevated majorities, covering amendments to the articles of association, capital increases or reductions, mergers, share buybacks, and dissolution. The Special Assembly brings together holders of a specific share class to vote on matters affecting their rights exclusively, such as modifying preferred share terms or converting one share class to another. Each type has its own quorum requirements, required majorities, and scope of competence, and resolutions passed within each type are binding on all relevant shareholders regardless of whether they attended or voted.

What quorum and voting majority requirements apply to each type of general assembly under Saudi law?

The quorum and majority rules differ by assembly type and meeting sequence. For the OGA, the first meeting requires shareholders representing at least 25% of voting shares; if quorum fails, the second meeting convenes one hour later and is valid with any number of shares present. Resolutions require an absolute majority exceeding 50% of represented votes. For the EGA, the first meeting requires 50% of voting shares; the second meeting requires 25%; and a third meeting, called with a fresh statutory notice, is valid regardless of attendance. Most EGA resolutions require a two-thirds majority, while fundamental resolutions such as capital changes, dissolution, or change of purpose require three-quarters. For the Special Assembly, quorum and majority follow the company's articles of association based on the relevant share class.

What are shareholders' rights regarding attendance and voting in Saudi general assemblies?

Every shareholder holds a fundamental right to attend general assemblies that cannot be lawfully restricted or waived. Attendance may take three forms: in person whether physically at the venue or virtually through approved electronic platforms, by proxy through a written authorization to another person who must not be a board member or company employee, and advance electronic voting which must remain open for no less than three days before the assembly date. Certain shareholders face voting restrictions on specific items: a director cannot vote on their own discharge from liability or remuneration, a party with an interest in a contract cannot vote on that contract, preferred shareholders generally do not vote in general assemblies except when the company fails to pay their prescribed profits for three consecutive years, and treasury shares carry no voting rights. These restrictions protect the integrity of resolutions and prevent conflicts of interest from distorting outcomes.

References and Sources

• Saudi Companies Law issued by Royal Decree No. (M/132) — chapters on General Assemblies.
• Implementing Regulations of the Companies Law (2023) — provisions on assemblies and voting.
• Implementing Regulations of the Companies Law for Listed Joint-Stock Companies, Capital Market Authority (CMA).
• Corporate Governance Regulations, Saudi Capital Market Authority.
• Capital Market Law and its implementing regulations.
• OECD Principles of Corporate Governance.
• International Charter of Shareholder Rights.