Temporary and Ad-hoc Committees

Acquisition, Crisis, CEO Search, and Investigation Committees

First: Introduction

Not all matters facing a board fit neatly into the mandates of permanent committees. Major acquisitions need focused attention; severe crises require rapid coordinated response; CEO searches demand confidential dedicated effort; serious allegations call for independent investigation. For these and similar situations, boards turn to temporary or ad-hoc committees — formed for a specific purpose, with a defined timeline, dissolved upon task completion.

In the Saudi system, the Companies Law and Corporate Governance Regulations don’t explicitly mandate temporary committees but neither do they prohibit them. Boards have flexibility to form them as needed. This article reviews the most common types of temporary committees, when to form them, their composition, mandates, and best practices for managing them effectively.

Second: When to Form a Temporary Committee

1. Justifying Criteria

A temporary committee makes sense when:

• Significant matter: Strategic, financial, or reputational importance.
• Specialized attention: Requires focused time and expertise.
• Confidentiality: Limited circle of involvement needed.
• Independence: Distance from permanent management or specific committees.
• Defined endpoint: Clear conclusion point.
• Time pressure: Needs rapid coordinated action.

2. When Not to Form

A temporary committee may not be appropriate when:

• Matter fits permanent committee mandate.
• Full board engagement is essential.
• Issue is too routine to warrant special attention.
• Adequate management process exists.
• Multiplication of committees would create confusion.

Third: Common Types of Temporary Committees

1. Acquisition Committee (M&A Committee)

1.1 Purpose

Formed when company contemplates major acquisition or major asset sale:

• Evaluating strategic fit.
• Overseeing due diligence.
• Approving terms within authorities.
• Recommending board decision.
• Negotiation oversight.
• Post-transaction integration oversight (sometimes).

1.2 When Formed

• Major acquisitions (above specific size threshold).
• Hostile takeover situations.
• Major asset divestitures.
• Merger discussions.
• Significant cross-border transactions.

1.3 Composition

• 3-5 members typically.
• Independent members preferred.
• Financial expertise essential.
• Industry knowledge valuable.
• M&A experience preferred.
• Independent chair.

1.4 Typical Duration

• 3-12 months typical.
• Extended for complex deals.
• Dissolved upon transaction completion (or termination).

2. Crisis Committee

2.1 Purpose

Formed in response to major crises:

• Rapid response coordination.
• Strategic decisions in crisis.
• Stakeholder communication oversight.
• Recovery planning.
• Lessons learned process.

2.2 When Formed

• Major operational failures.
• Cybersecurity breaches.
• Regulatory investigations.
• Major litigation.
• Reputational crises.
• Natural disasters affecting operations.
• Pandemic or similar disruptions.

2.3 Composition

• Senior members with crisis experience.
• Mix of expertise relevant to crisis.
• Strong chair with decision-making authority.
• CEO or CFO may attend.
• Small size (3-5) for agility.

2.4 Operating Mode

• Frequent meetings (initially daily, then weekly).
• Rapid decision-making authorities.
• Direct communication with executives.
• Specialized advisors engaged quickly.
• Regular board updates.

3. CEO Search Committee

3.1 Purpose

Formed for CEO succession:

• Planned succession.
• Emergency succession.
• CEO termination.
• Defining role and profile.
• Conducting search.
• Evaluating candidates.
• Recommending appointment.

3.2 Relationship with Nominations Committee

Two common approaches:

• Approach 1: Nominations committee handles, no separate committee.
• Approach 2: Dedicated CEO search committee formed.

Reasons for dedicated committee:

• Confidentiality (limiting circle).
• Time intensity (intensive process).
• Specialized expertise (executive search).
• Avoiding routine work distraction.

3.3 Composition

• 3-5 members.
• Independent majority.
• Including HR expertise.
• Including industry leaders.
• Chair often is board chair or lead independent.

3.4 Working with Search Firms

• Selecting executive search firm.
• Defining ideal profile.
• Reviewing candidate slates.
• Interviewing finalists.
• Reference checks.
• Negotiating terms.

4. Investigation Committee

4.1 Purpose

Formed for serious investigations:

• Allegations of executive misconduct.
• Fraud investigations.
• Whistleblower complaints (serious).
• Regulatory violations.
• Significant operational failures.
• Independent review of major incidents.

4.2 When Formed

When investigation cannot or should not be handled by:

• Internal audit alone.
• Audit committee (especially if it touches on audit committee oversight).
• Executive management (especially if management involved).

4.3 Composition

• Fully independent members.
• Distance from involved parties.
• Legal expertise.
• Investigation experience preferred.
• Strong independence.

4.4 Operating Principles

• Strict confidentiality.
• Independent legal counsel.
• Independent investigators (often external).
• Documented process.
• Privilege protection.
• Clear findings and recommendations.

5. Special Project Committee

5.1 Purpose

Formed for specific major projects:

• IPO preparation.
• Major restructuring.
• Significant capital raise.
• Major regulatory transition.
• Headquarters relocation.
• Major rebranding.

5.2 Composition and Mandate

• Project-specific expertise.
• Decision-making authorities within scope.
• Defined milestones.
• Dissolution upon completion.

6. Special Litigation Committee

6.1 Purpose

Formed in specific legal contexts:

• Derivative litigation.
• Shareholder demands.
• Material disputes.
• Whether to pursue or settle major claims.

6.2 Operating Principles

• Complete independence.
• Independent legal counsel.
• Documented process.
• Privilege protection.
• Reasoned conclusions.

Fourth: Formation Procedures

1. Board Decision

Formal board resolution required:

• Decision to form committee.
• Stated purpose and scope.
• Member appointments.
• Chair designation.
• Authorities granted.
• Reporting requirements.
• Expected duration.

2. Committee Charter

Even temporary committees benefit from charters:

2.1 Charter Components

• Purpose and scope.
• Authorities (decision-making, recommendation-only).
• Reporting to board.
• Meeting frequency.
• Confidentiality requirements.
• Resources (budget, advisors).
• Duration and dissolution.

2.2 Charter Brevity

Temporary committee charters can be shorter than permanent committee charters:

• Focus on specific matter.
• Less regulatory complexity.
• Faster approval.
• Practical orientation.

3. Resources and Support

• Secretariat support (board secretary or designated person).
• Budget for advisors.
• Technology and meeting facilities.
• Access to needed information.
• Direct communication with executives.

4. Authority Levels

4.1 Recommendation Only

Committee studies and recommends; board decides:

• Common for major strategic decisions.
• Preserves board’s ultimate authority.
• Slower decision-making.

4.2 Delegated Authority

Committee can decide within limits:

• Faster decision-making.
• Clear limits defined.
• Board ratification typical for major decisions.

4.3 Full Authority

Rare — committee has board-equivalent authority on specific matter:

• Only for very specific tasks.
• Clear scope definition.
• Board oversight retained.

Fifth: Operating Effectively

1. Composition Considerations

1.1 Expertise Match

Members should match the committee’s purpose:

• Acquisition: M&A, finance, industry knowledge.
• Crisis: Crisis management, communications, sector expertise.
• CEO Search: HR, leadership assessment, industry.
• Investigation: Legal, investigation, audit.

1.2 Independence

• Independence from matter at hand.
• No conflicts of interest.
• Distance from any involved parties.

1.3 Time Availability

Temporary committees often demand intensive time:

• Confirming availability upfront.
• Realistic time estimates.
• Backup arrangements if needed.

1.4 Group Dynamics

• Members who work well together.
• Strong chair.
• Constructive challenge culture.
• Decision-making capability.

2. Meeting Frequency

3. Reporting to Board

3.1 Regular Updates

• After each meeting.
• Written summaries.
• Chair presentations at board meetings.
• Confidentiality maintained where required.

3.2 Decision Points

• Pre-decision briefings.
• Recommendation presentations.
• Discussion opportunity.
• Board approval where required.

3.3 Final Report

• Comprehensive summary.
• Process followed.
• Findings and recommendations.
• Lessons learned.
• Suggested follow-up.

4. External Advisors

Most temporary committees engage external advisors:

• Legal advisors.
• Financial advisors.
• Industry experts.
• Communications consultants.
• Specialized investigators.
• Executive search firms.

Engagement principles:

• Direct retention by committee (not management).
• Independence from company management.
• Clear scope and fees.
• Confidentiality agreements.

5. Confidentiality

Most temporary committees handle sensitive matters:

• Strict information control.
• Limited distribution lists.
• Secure document handling.
• Member confidentiality obligations.
• Advisor confidentiality agreements.
• Communication discipline.

Sixth: Acquisition Committee Deep Dive

1. Pre-Deal Stage

1.1 Strategic Review

• Strategic rationale assessment.
• Alternative considered.
• Strategic fit evaluation.
• Market timing.

1.2 Initial Valuation

• Valuation analysis.
• Price range determination.
• Financing implications.
• Risk assessment.

2. Due Diligence Phase

2.1 DD Scope

• Financial due diligence.
• Legal due diligence.
• Commercial due diligence.
• Operational due diligence.
• HR due diligence.
• IT due diligence.
• ESG due diligence.

2.2 Committee’s Role

• Approving DD scope.
• Selecting DD advisors.
• Reviewing findings.
• Flagging significant issues.
• Determining deal-breakers.

3. Negotiation Phase

• Negotiating strategy.
• Key terms framework.
• Walk-away conditions.
• Concession authority.
• Periodic strategy review.

4. Approval Phase

• Final terms review.
• Risk-benefit assessment.
• Financing confirmation.
• Regulatory approvals.
• Final recommendation to board.

5. Closing Phase

• Closing condition monitoring.
• Regulatory filing oversight.
• Communication strategy.
• Closing execution.

6. Post-Closing (Optional)

Committee may continue briefly for:

• Integration oversight.
• Initial performance monitoring.
• Lessons learned process.
• Eventually dissolves, with audit committee taking over standard oversight.

Seventh: Crisis Committee Deep Dive

1. Initial Response (First 48 Hours)

• Situation assessment.
• Immediate containment actions.
• Stakeholder notification (regulators, key parties).
• Communications strategy.
• External advisor engagement.
• Daily meetings established.

2. Stabilization Phase

• Operational continuity.
• Financial impact assessment.
• Stakeholder management.
• Investigation initiation if needed.
• Regulatory cooperation.
• Insurance coordination.

3. Recovery Phase

• Recovery planning.
• Rebuilding trust.
• Operational improvements.
• Litigation management.
• Ongoing communications.

4. Lessons Learned

• Root cause analysis.
• Process improvements.
• Policy updates.
• Training enhancements.
• Final report.
• Committee dissolution.

Eighth: Investigation Committee Deep Dive

1. Investigation Initiation

• Allegation receipt and assessment.
• Committee formation.
• Independent counsel engagement.
• Investigator selection.
• Scope definition.
• Confidentiality protocols.

2. Investigation Execution

• Document preservation.
• Document review.
• Forensic analysis if needed.
• Independent expert engagement.
• Privilege preservation.

3. Findings Phase

• Evaluating evidence.
• Drawing conclusions.
• Recommendations development.

4. Action Phase

• Reporting to board.
• Recommended actions implementation oversight.
• Disciplinary actions if warranted.
• Process improvements.
• Regulatory reporting if required.
• External disclosure decisions.

Ninth: Common Challenges

1. Scope Creep

Temporary committees can expand beyond original scope:

• New issues emerging.
• Pressure to add responsibilities.
• Reluctance to dissolve.

Treatment:

• Clear charter at start.
• Periodic scope review.
• Formal expansion process if needed.
• Discipline in dissolution.

2. Coordination with Permanent Committees

Overlap with permanent committees can confuse:

• Acquisition vs. audit.
• Crisis vs. risk.
• Investigation vs. audit.

Treatment:

• Clear charter boundaries.
• Joint meetings when relevant.
• Cross-committee membership.
• Clear communication protocols.

3. Time Demands

Members may struggle with intensive demands:

• Member burnout.
• Conflicting commitments.
• Reduced effectiveness.

Treatment:

• Realistic upfront expectations.
• Adequate support staff.
• Compensation reflecting work.
• Realistic timelines.

4. Information Control

Maintaining confidentiality is hard:

• Many people involved.
• Long timelines.
• Pressures to share.

Treatment:

• Strict protocols.
• Limited distribution.
• Secure systems.
• Regular reinforcement.
• Consequences for breaches.

Tenth: Best Practices

1. Formation

• Clear board decision.
• Written charter.
• Defined scope and authorities.
• Expected timeline.
• Resources allocated.

2. Composition

• Expertise match to purpose.
• Independence appropriate to matter.
• Strong chair.
• Realistic time availability.
• Confidentiality commitment.

3. Operation

• Appropriate meeting frequency.
• Quality external advisors.
• Disciplined process.
• Regular board updates.
• Confidentiality maintained.

4. Conclusion

• Clear final report.
• Lessons documented.
• Formal dissolution.
• Handoff to permanent oversight if needed.
• Records preserved appropriately.

Conclusion

Temporary committees are valuable tools in the board’s governance toolkit. They enable focused attention on critical matters without overwhelming permanent structures. They bring specialized expertise and independence to complex situations. And they have natural endpoints that prevent governance bloat.

The art lies in knowing when to form them, how to charter them, who to put on them, and how to dissolve them. Saudi companies, as they navigate increasingly complex strategic, operational, and regulatory environments, will find temporary committees increasingly useful. The boards that master this tool — using it judiciously and effectively — gain significant governance advantage in handling major matters. The boards that misuse it create confusion and undermine their own structures.

References and Sources

• Corporate Governance Regulations issued by the Capital Market Authority.
• Saudi Companies Law (Royal Decree M/132).
• Implementing Regulations of the Companies Law for Listed Joint-Stock Companies.
• Harvard Business Review — Special Board Committees.
• Spencer Stuart — M&A Committee Practices.
• McKinsey — Crisis Management for Boards.
• Egon Zehnder — CEO Succession Best Practices.
• NACD — Investigation Committee Guidelines.
• Deloitte — Special Committee Best Practices.
• Latham & Watkins — Special Committee Practices in M&A.