Mandatory Items, Optional Items, and Drafting Resolutions

Introduction

The agenda is the operational backbone of any General Assembly. It defines what shareholders will discuss, what they will vote on, and the order in which they will do so. A well-drafted agenda is not merely an administrative formality—it is a strategic document that signals the company’s priorities to the market, protects against legal challenges, and shapes the quality of shareholder engagement.

In Saudi Arabia, the agenda is subject to both statutory requirements and best-practice expectations. Some items must appear by law; others are added at the discretion of the Board or upon shareholder request. The corporate secretary’s craft lies in balancing these requirements while ensuring the agenda is clear, comprehensive, and free of legally vulnerable wording. This article addresses the mandatory and optional content of the agenda, the principles of resolution drafting, and the procedures for amendment and finalization.

First: The Concept and Importance of the Agenda

Definition

The agenda is the official document, attached to the notice of meeting, that sets out the items to be discussed and voted upon at the Assembly. It must be specific enough to enable shareholders to make informed decisions about attendance and voting, yet flexible enough to permit reasonable deliberation.

Legal Importance

The agenda has substantial legal weight:

• Resolutions may, as a rule, only be taken on items appearing on the agenda.
• A resolution taken on a non-agenda item is liable to annulment.
• The agenda binds the Board and management equally.
• It establishes the framework within which shareholders may exercise their rights.

Strategic Importance

• Signals the company’s priorities and direction to the market.
• Enables shareholders to prepare and engage meaningfully.
• Shapes the perception of the company among analysts and institutional investors.
• Can either reinforce or undermine trust depending on its quality.

⚠️  Critical Principle The general rule under Saudi law is that the Assembly may only deliberate on items appearing on the agenda. Deviation from this rule is permitted only in narrowly defined circumstances—chiefly, urgent matters that arise during the Assembly itself and that fall within its competence. Even then, careful documentation is required.

Second: Mandatory Items in the Ordinary General Assembly

The Annual Ordinary General Assembly must address certain items mandated by law. The absence of any of these items, without justification, may expose the Board to liability.

1. Review of the Board of Directors’ Report

The Board’s annual report on the company’s activities, financial position, and major events during the year. It must include:

• A review of the company’s operations and the markets in which it operates.
• Major events affecting performance during the year.
• A summary of risks the company faces.
• Outlook for the coming year.
• The Board’s recommendations on dividends.
• Disclosures required by the Corporate Governance Regulations.

2. Review of the External Auditor’s Report

The external auditor’s report on the financial statements, which forms an independent attestation to the integrity of the company’s financial position. The report falls within one of four categories: unqualified, qualified, adverse, or disclaimer.

3. Approval of the Financial Statements

The approval of audited financial statements for the financial year ended. These include:

• Statement of financial position (balance sheet).
• Statement of profit or loss.
• Statement of cash flows.
• Statement of changes in equity.
• Notes to the financial statements.

4. Approval of the Dividend Distribution

Approving or rejecting the Board’s recommendation on dividend distribution. This item is often the focus of strong shareholder interest.

5. Discharge of Directors

The decision to discharge directors from liability for the financial year ended is a critical legal protection for the Board. Discharge requires the absolute majority of the votes represented.

6. Appointment of External Auditor and Determination of Fees

Either the appointment of a new auditor or the reappointment of the existing one, with determination of their professional fees, based on the recommendation of the Audit Committee.

7. Approval of Related-Party Transactions

Approval of contracts and dealings in which a director, a senior executive, or a related party has an interest. Each contract is voted upon separately, and the interested party is excluded from voting.

8. Director Elections (When Applicable)

When directors’ terms have expired (typically every three years), elections are held using cumulative voting, in accordance with the Corporate Governance Regulations.

Third: Items in the Extraordinary General Assembly

Items in the Extraordinary General Assembly are more diverse and depend on the circumstances calling for the meeting. The principal items include:

1. Amendments to the Articles of Association

• Changing the company name.
• Changing the company’s purpose.
• Modifying the head office address.
• Modifying provisions relating to assemblies or the Board.
• Updating the articles to align with new regulations.

2. Changes to Share Capital

• Capital increase (cash issue, rights issue, capitalization of reserves).
• Capital reduction (loss absorption or treasury share cancellation).
• Share buy-backs.
• Share splits or consolidations.
• Issuance of preferred shares.

3. Corporate Restructuring

• Mergers with another company.
• Demergers or splits.
• Conversion to another legal form.
• Sale of material assets.

4. Capital Markets Decisions

• Issuance of sukuk or debt instruments.
• Listing the company on the market or delisting.
• Issuance of convertible instruments.

5. Lifecycle Resolutions

• Extending the company’s term.
• Voluntary liquidation.
• Appointment of liquidators.

Fourth: Optional Items and Best Practices

In addition to the mandatory items, the Board may add optional items that enhance transparency and engagement with shareholders:

1. Reports on Strategy and Performance

• Presentation of the next five-year strategic plan.
• Comparison of actual versus targeted performance.
• Outlook on major new projects.

2. Governance Disclosures

• Detailed report on Board and committee performance.
• Discussion of executive remuneration policy.
• Disclosures on diversity and inclusion.

3. Sustainability and ESG

• ESG report (Environment, Social, Governance).
• Sustainability strategy.
• Carbon footprint and reduction targets.

4. Open Discussion

• A dedicated time slot for shareholder questions.
• Q&A session with senior executives.
• Open dialogue on strategic issues.

Fifth: Adding Items at Shareholders’ Request

One of the major reforms introduced by the new Saudi Companies Law is the strengthened right of minority shareholders to add items to the agenda.

Requirements for Adding Items

• The request must come from shareholders representing at least 1% of the company’s shares (subject to the articles).
• The request must be submitted within the period stipulated in the law (typically 10 days from publication of the notice).
• The item must fall within the Assembly’s competence.
• It must be sufficiently specific to permit voting.

Procedure for Adding Items

• Submission of the written request to the Board.
• Board review of the request within a defined timeframe.
• Either acceptance and amendment of the agenda, or reasoned rejection.
• Disclosure of the amendment on Tadawul, where applicable.
• Communication to shareholders of the updated agenda.

📌  Important Note The Board may not reject a shareholder’s request to add an item unless the request fails to meet legal requirements or contradicts mandatory law. Arbitrary rejection of a legitimate request exposes the Board to legal challenge.

Sixth: The Art of Drafting Resolutions

How resolutions are worded is at least as important as the substance. A poorly drafted resolution can produce serious legal problems, even when its substance is sound.

Principles of Good Drafting

1. Clarity

• Use clear language understandable to non-specialists.
• Avoid technical jargon where possible.
• Define terms that may be ambiguous.

2. Specificity

• Specify exact figures (amounts, percentages, dates).
• Identify the parties involved precisely.
• Avoid vague language such as ‘as the Board sees fit’ without limits.

3. Completeness

• Include all elements necessary to give effect to the resolution.
• Reference relevant regulatory and statutory provisions.
• Set out the procedural steps for implementation.

4. Legal Soundness

• Compatibility with the Companies Law and the regulations.
• Compatibility with the articles of association.
• Avoidance of provisions that may be invalid.

Sample Resolutions

Example 1: Dividend Distribution

Weak Drafting: “Approval of dividends to shareholders.”

Strong Drafting: “Approval of cash dividends to the company’s registered shareholders as at the close of trading on the second business day following the date of this Assembly, at the rate of (X) Saudi Riyals per share, for a total of (Y) Saudi Riyals. Dividends shall be distributed within thirty days from the date of approval, in accordance with the Corporate Governance Regulations.”

Example 2: Election of a Director

Weak Drafting: “Election of Mr. X to the Board.”

Strong Drafting: “Election of Mr. (Full Name), (Position/Classification), to the Board of Directors for the new term commencing (Date) and ending (Date), for a duration of three years, as an Independent/Non-Executive Director, in accordance with the cumulative voting mechanism set out in Article (X) of the Corporate Governance Regulations.”

Example 3: Approval of a Related-Party Contract

Weak Drafting: “Approval of contracts with related parties.”

Strong Drafting: “Approval of the (Type) contract between the company and (Counterparty), in which Director Mr. (Name) has an indirect interest by virtue of his ownership of (X)% of the counterparty. The contract value is (Y) Saudi Riyals for a term of (Z) years, on market terms reviewed by the Audit Committee and recommended to the Assembly. The interested director shall not participate in the vote on this resolution.”

Seventh: Logical Order of the Agenda

Item order matters more than is commonly realized. It affects shareholder attention, voting quality, and the flow of the Assembly.

Recommended Order

• Opening, welcome, and reading of the previous Assembly’s minutes.
• Quorum verification.
• Board of Directors’ annual report.
• External auditor’s report.
• Approval of the financial statements.
• Approval of dividend distribution.
• Discharge of directors.
• Director-related decisions (election, remuneration).
• Appointment of external auditor.
• Approval of related-party transactions.
• Special items (Extraordinary General Assembly).
• Other items proposed by shareholders.
• Open discussion.
• Closing.

Ordering Considerations

• Increasing Complexity: Begin with straightforward items and progress to complex ones.
• Substantive Linkage: Group related items together (e.g., financial statements before dividends).
• Cause and Effect: Approve the financial statements before discharging directors, since discharge is based on the statements.
• Attention Energy: Place the most important items in the first hour, when attention is highest.

Eighth: Supporting Documents for Each Agenda Item

Each agenda item must be accompanied by sufficient documents to enable shareholders to make informed decisions:

Item	Required Documents
Board Report	Full report, executive summary, accompanying presentation
Financial Statements	Audited statements, comparison with prior year, key indicators
Auditor’s Report	Full report, key observations
Dividends	Calculation of distributable amount, distribution mechanism, timeline
Director Elections	CVs, classifications, business relationships, candidate statements
External Auditor Appointment	Recommendation of the Audit Committee, comparison of offers
Related-Party Transactions	Detailed contract, justifications, evaluation of terms
Articles Amendments	Comparison of current and proposed wording, justification
Capital Increase	Detailed study, proceeds, distribution mechanism
Mergers and Acquisitions	Detailed studies, valuations, expected impact

Ninth: Final Review of the Agenda

Before publishing the agenda, several review layers must be completed:

1. Internal Legal Review

• Compatibility with the Companies Law.
• Compatibility with the articles of association.
• Internal consistency among items.

2. External Legal Review

• Independent perspective from external counsel.
• Review of complex matters in particular.
• Confirmation of compatibility with the latest regulations.

3. Audit Committee Review

• Items relating to financial statements and related-party transactions.
• Confirmation of completeness of disclosures.

4. Board Approval

• Final approval of the Board for the agenda in its final form.
• Documentation in the minutes of the relevant Board meeting.

5. Disclosure and Publication Review

• Compatibility with the CMA’s disclosure requirements.
• Readiness for publication on Tadawul.

Tenth: Common Pitfalls in Drafting the Agenda

1. Generic Language

Phrases such as “approval of contracts as the Board sees fit” without specifying details, which weakens the resolution and exposes it to challenge.

2. Combining Items

Combining multiple items into one (e.g., “approval of the Board report and financial statements and discharge of directors”) deprives shareholders of the right to vote on each separately.

3. Ambiguity in Numbers

Missing specific figures (amounts, percentages) creates uncertainty.

4. Omitting Mandatory Items

Such as forgetting to include the appointment of the external auditor or director elections at term-end.

5. Adding Non-Competence Items

Including items that fall outside the Assembly’s competence (e.g., executive-management matters).

6. Inadequate Supporting Documentation

Failing to provide sufficient documents to enable informed voting.

Eleventh: Practical Recommendations

• Begin Early: Begin drafting the agenda at least six weeks before the Assembly.
• Multidisciplinary Team: Involve corporate secretary, legal counsel, IR officer, and finance.
• Multiple Reviews: At least three review layers before publication.
• Plain Language: Write resolutions in clear language understandable to ordinary shareholders.
• Full Documentation: Detailed supporting documents for every item.
• Logical Ordering: Order items in a way that enhances discussion and decision-making.
• Flexibility: Prepare for the possibility of adding items at shareholders’ request.
• Specialist Consultations: On complex matters such as mergers and acquisitions.
• Continuous Improvement: Review the agendas of leading companies for ideas to improve.

Conclusion

A well-drafted agenda is a hallmark of a well-governed company. It reflects the company’s seriousness about transparency, its respect for shareholder rights, and its strategic vision. The corporate secretary or governance officer responsible for drafting must combine legal expertise, professional drafting skills, and a deep understanding of the company’s affairs.

Quality investment at the drafting stage pays off many times over during the Assembly and afterwards. It reduces legal risk, enhances market trust, supports informed shareholder decisions, and builds a strong reputation that attracts long-term investors. The agenda is, ultimately, the contract between the company and its shareholders on what will be discussed and decided.

🎯  Essential Points to Remember (1) The agenda is the operational and legal backbone of any Assembly. (2) Resolutions may be taken, as a rule, only on items appearing on the agenda. (3) The OGA contains mandatory items: Board report, financial statements, dividends, discharge, auditor appointment, related-party transactions. (4) The EGA’s items depend on the convening circumstances. (5) Shareholders representing 1% of shares may request additional items. (6) Good drafting requires clarity, specificity, completeness, and legal soundness. (7) Logical ordering of items enhances discussion quality and decision-making. (8) Each item must be supported by sufficient documentation. (9) Multiple review layers are required before publication. (10) Common pitfalls include generic language, item combination, and ambiguity.

Frequently Asked Questions

What items must legally appear on an Ordinary General Assembly agenda in Saudi Arabia?

Eight categories of items are legally required in every annual OGA. The Board of Directors' annual report covering operations, financial position, major events, risks, and the dividend recommendation. The external auditor's report providing independent attestation of the financial statements. Approval of the audited financial statements covering the balance sheet, profit or loss statement, cash flow statement, equity changes statement, and notes. The dividend distribution resolution approving or rejecting the Board's recommendation. Discharge of directors from liability for the completed financial year, requiring an absolute majority. Appointment of the external auditor and determination of fees based on the Audit Committee's recommendation. Approval of related-party transactions with each contract voted on separately and the interested party excluded from voting. Director elections using the mandatory cumulative voting mechanism when board terms have expired. Omitting any of these items without justification may expose the Board to legal liability.

What are the principles of effective resolution drafting for a Saudi general assembly?

How can minority shareholders add items to a Saudi general assembly agenda and what are the limits?

The new Saudi Companies Law significantly strengthened minority rights in this area. Shareholders representing at least 1% of the company's shares may submit a written request to the Board to add an item, provided the request is filed within the period stipulated by law — typically ten days from publication of the notice. The item must fall within the Assembly's competence and be specific enough to permit a vote. Upon receiving a valid request the Board must review it within a defined timeframe and either accept it by amending and republishing the agenda on Tadawul, or reject it with written reasons. The Board may only reject a request if it fails to meet legal requirements or contradicts mandatory law — arbitrary rejection of a legitimate request exposes the Board to legal challenge by the requesting shareholders. This right is particularly powerful when combined with advance electronic voting, giving minority shareholders a practical tool to influence the agenda without needing to coordinate a physical presence at the assembly.

References and Sources

• Saudi Companies Law (M/132) — Article 86 on the Assembly agenda.
• Corporate Governance Regulations of the Capital Market Authority.
• Implementing Regulations of the Companies Law for Listed Joint-Stock Companies.
• Disclosure and Transparency Rules of Tadawul.
• OECD Principles of Corporate Governance — Section on the Agenda.
• Best Practices in Drafting AGM Agendas — ICGN.
• Guide to Corporate Secretarial Practice — ICSA.