Saudi capital markets regulator extends its accountability push past listing day into companies already trading

Saudi Arabia’s capital markets regulator is moving its accountability push past listing day and into the lives of companies already on the exchange. The Capital Market Authority’s draft overhaul (pdf) of the corporate governance rules — out for a 30-day consultation on the Istitlaa platform since 29 October — would give minority shareholders with as little as 5% of the voting rights more tools to hold boards accountable and force more public disclosures. The rules “aim to enhance shareholder participation in decisions at the companies they invest in, alongside higher levels of transparency and accountability,” the CMA said in the draft’s preamble.

The 5% threshold is the provision with the most obvious international read. It should make the market significantly more attractive for minority shareholders, Hasnain Malik, emerging markets equity strategist at Tellimer, tells us. The rules are similar to corporate governance regimes in many international markets like the UK, he adds.

Some of the rules will also have an impact on pricing, especially in small caps, by forcing ownership and related-party dealing disclosures that make more data available, whose lack thereof manifests in the form of discounts, Alpha Capital CEO Mahmoud Saadeh tells EnterpriseAM.

Why it matters: The CMA scrapped the Qualified Foreign Investor (QFI) regime on 1 February, opening the main market to every category of non-resident investor, and foreign money has been building for years. Saudi equities drew USD 2.6 bn in net foreign buying in 1Q 2026 — the largest share in the GCC — after the lifting of QFI restrictions allowed direct participation by institutional and individual foreign investors. For that buyer, opaque related-party dealings and unaccountable boards feed straight into the risk premium. Retail investors, who drive most small-cap trading, will feel these changes slowly, Saadeh says. The institutional and foreign buyers the CMA is courting will feel them first, because that buyer prices governance through the discount rate.

IN CONTEXT- The new rules move on the post-listing accountability gap that we flagged previously when we looked at the regional IPO accountability reckoning last month. The CMA approved its new IPO rules this week, which hold underwriters accountable when demand falls short, after a streak of underperforming listings. Ubhar Capital’s Tahir Abbas told us the next frontier was what happens after the allocation — that accountability should not end once an IPO lists. Riyadh, Abu Dhabi, Muscat, and Istanbul have each been pulling a different lever on the same problem: That the numbers investors price off have not been reliable enough. The CMA’s own IPO rewrite went after demand that looked bigger than it was. This draft goes after the years that follow.

Two tiers of rules

The sharpest rules target companies with accumulated losses reaching half of paid-up capital. They are enforceable the moment a company’s losses cross that line, and only end once losses fall back below 20%. A company in that bracket would have to disclose on Tadawul the names and holdings of every shareholder owning 1% or more, or of its top 20 shareholders, whichever list is longer. It would have to hold hybrid assemblies throughout; the threshold for shareholders to add agenda items would drop from 10% to 5%; and board compensation would require general assembly approval.

Minority shareholders will also be able to force a recovery plan: Shareholders with as little as 5% voting rights could put a resolution on the agenda tasking the board with preparing a recovery plan setting out the root causes of the losses, the steps to be taken, measurable targets, and a timeline. The board would publish it on Tadawul within 60 days of the assembly’s decision, then issue monthly or quarterly progress reports within five days of each period’s end, comparing results against targets, explaining deviations and justifying any changes to the plan — until losses fall below 20%.

REMEMBER- Under Article 132 of the Companies Law, listed firms whose losses reach half of issued capital are required to disclose the fact within 60 days, and within 180 days to call an extraordinary general assembly to address solvency and weigh continuation against dissolution, as Methanol Chemicals set out in its own filing.The draft doesn’t touch this process, which means recovery plans come after the general assembly had already decided on continuation.

Fourteen listed companies would fall under the regime as it stands. Tadawul’s register of firms whose accumulated losses have already reached 50% currently includes Methanol Chemicals, Takween Advanced Industries, Saudi Cable, Saudi Vitrified Clay Pipes and Saudi Industrial Export, alongside Saudi Printing and Packaging, AFG International, Naseej International Trading, Thimar Development Holding, Raydan Food, Tabuk Agricultural Development and Al Kathiri Holding, Gulf General Cooperative Ins. and United Cooperative Assurance. Another seven companies sit in the 35-50% orange zone and could join the list if their losses widen in their next earnings report.

Then you have another tier of rules that applies to every listed company, deep in the red or not. Holders of at least 5% of voting shares could request that a general assembly be held in person alongside remote access, with the request made within five days of the meeting notice and the board obliged to comply. All shareholders could submit questions within five days of the notice; boards would have to give them a separate agenda item with enough time to answer; and every Q&A would have to be recorded and published on the company’s website within 10 working days.

The market-wide new rules also target related-party dealings. It widens the definition of “related parties” to pull in the controlling persons behind corporate shareholders, subsidiaries’ executives, and relatives of both, and requires audit committees to prove those agreements are priced fairly and carry no preferential terms.

Board seats get the same treatment. Nomination committees would have to document why they reject a candidate and could not turn away anyone meeting the criteria, and audit committee chairs would have to be independent.

The pricing impact

Three of those provisions could move stock pricing — the rest is housekeeping best practices, Alpha Capital’s Saadeh tells us. The two he rates highest are both in the red-zone tier: The disclosure requirement of shareholders with stakes of 1% or greater, and the remuneration vote. The third, the related-party regime, is the only one of his three that reaches the whole market.

The shareholder register will have its strongest pricing impact in small-cap listings: “In a small-cap, the question every institution asks before pricing is who actually controls the float. Today that is often guesswork, and guesswork gets priced as a discount,” Saadeh tells us.

The remuneration vote can also lead to better pricing: A board at a company that has burned through half its capital would have to put its own pay to the shareholders who have absorbed those losses, with the reasoning attached. Pay that has to survive that tends to follow performance, Saadeh says.

The third, the audit-committee check on related-party pricing, targets value leaking out through insider transactions, which Saadeh says impacts small-cap listings the most. Close that leak credibly, he says, and the discount narrows. But independent audit chairs only matter if the independence is real, he adds, and that will show up in how the first contested related-party deal is handled.

Our take

The new draft rules do not lay out consequences for missed recovery targets — and that’s an enforcement gap. A plan with public root causes and measurable targets, followed by regular progress reports, gives minority shareholders accountability tools and creates important public records. But the text is silent on what follows a missed target.

A predictable escalation ladder could be written in to avoid delisting, which Saadeh says mostly punishes the minority shareholders the rules exist to protect by trapping them in illiquid stock.

Saadeh’s pitch? Include measures that can hold board members accountable. If two consecutive targets are missed, an independent review and an automatic shareholder vote on the board should be triggered, with related-party deals and board pay frozen until the company is back on plan. “Markets reward rules that are predictable because investors can price a clear ladder of consequences,” he adds.