ART​ICLES OF ASSOCIATION

Saudi Electricity Company: Date: 6/9/1420 H

A Saudi Joint Stock Company Royal Decree no. M/16

With the help of God

We, Fahd Bin Abdul Aziz,

King of the Kingdom of Saudi Arabia,

Pursuant to Article No. 20 and Article No. 70 of the Basic Ruling Regulations issued by the Royal decree No. (A/90) of 27/8/1412 H; and

Pursuant to Article No. 20 of the Council of Ministers Regulations issued by the Royal decree No. (A/13) of 3/3/1414 H; and

Pursuant to Article No. 18 of the Shura Council Regulations issued by the Royal decree No. (A/91) of 27/8/1412 H; and

Pursuant to Article No. 2 and Article No. 52 (as amended) of the Companies Regulation issued by the Royal decree No. (M/6) of 22/3/1385 H; and

Having reviewed the Royal decree No. (M/8) of 25/7/1415 H; and

Having reviewed the Decision of the Shura Council No. (10/14) of 21/6/1419 H; and

Having reviewed the Decision of the Council of Ministers No. (153) of 5/9/1420 H;

order the following:

First – To approve the incorporation of the Saudi Electricity Company in accordance with its bylaws, attached herewith;

Second – To cancel the electricity charge mentioned in item (Second) of the Royal Decree No. (M/8) of 25/7/1415 H as soon as applying the tariff defined by the Decision of Council of Ministers No. (169) of 11/8/1419 H;

Third – His Royal Highness Vice Prime Minister and concerned ministers shall execute this decree, each in his domain.

Fahd Bin Abdul Aziz

Resolution of the Council of Ministers No. (153) of 5/9/1420H

The Council of Ministers,

Having reviewed the file sent by the bureau of the Council of Ministers No. 14024/R of 7/10/1419 H containing the letter of HE the Minister of Industry and Electricity, and HE the Minister of Commerce No. 742/26 of 13/9/1419 H, regarding the establishment of the Saudi Electricity Company in accordance with its Draft bylaws attached herewith; and

Having reviewed the Decision of the Council of Ministers No. (169) of 11/8/1419 H; and

Having reviewed the Decision of the Shura Council No. (10/14) of 21/6/1419 H; and

Having reviewed the Royal Decree No. (M/8) of 25/7/1415 H; and

Having reviewed Article No. 2 and Article No. 52 (as amended) of Companies Regulation issued by the Royal decree No. (M/6) of 22/3/1385 H; and

Having reviewed the bylaws of the Saudi Electricity Company; and

Having reviewed the Minutes of Meeting No. (199) of 8/7/1420 H prepared by Experts Committee; and  Having reviewed both recommendations of the General Committee of the Council of Ministers No. (429) of 14/8/1420 H and No. (438) of 28/8/1420 H,

Has hereby decided as follows:

1. To approve the incorporation of the Saudi Electricity Company in accordance with its bylaws attached herewith;

2. To cancel the electricity charge mentioned in item (Second) of the Royal Decree No. (M/8) of 25/7/1415 H as soon as applying  the tariff defined by the Decision of Council of Ministers No. (169) of 11/8/1419 H;

3. To settle the amounts uncollected from the government for the Electricity Charge Fund in accordance with paragraph (1) of item (Second) of the Decision of the Council of Ministers No. (169) of 11/8/1419 H.

Prime Minister

Ministerial Decision No. 2047 dated 30/12/1420

In respect with the establishment of the Saudi Electricity Company –“Joint-Stock Company”

The Minister of Commerce,

In view of the authorities vested upon him;

Upon reviewing the Companies Regulation, as amended, issued by the Royal Decree No. M/6 dated 22/3/1385 H;

Upon reviewing the Royal Decree No. M/16 dated 6/9/1420 in approval of the establishment of the Saudi Electricity Co. ( A joint Stock Company);

Upon reviewing the bylaws of the Saudi Electricity Company and the contracts of merger with the existing electricity companies as well as the resolutions of the Company Institutional Assembly held on 25/11/1420 H;

has hereby decided as follows:

Article One : Declaration of the institution of the Saudi Electricity Company ( a joint-stock company).

Article Two : This Decision and the Company bylaws shall be published in the official gazette (1).

(signed and stamped)

Usama J. Faqeeh

Minister of Commerce

Published in Om Al-Qura gazette edition no. 3790 on 16/1/1421 H.

Chapter One : Incorporation of the Company

Article (1):

A Saudi joint stock company, called the Saudi Electricity Company (SEC), shall be established under the companies Regulation, as amended, issued by virtue of Royal Decree No. M/16 dated 22/03/1385H pursuant to the terms and conditions of these bylaws.

Article (2) Purposes of the company:

The purposes for which the company is established are as follows:-

1- To generate, transmit, and distribute electric power in the Kingdom of Saudi Arabia by the company or by the affiliate companies partially or totally owned by it.

2- To buy, sell, and deliver electricity services in the Kingdom of Saudi Arabia by the company or by affiliate companies partially or totally owned by it against a financial charge to be collected from consumers according to the regulations applicable in the Kingdom of Saudi Arabia.

3- To participate and invest in projects to generate, transmit, and distribute electric power inside or outside the Kingdom of Saudi Arabia as per to the relevant regulations.

4- To import and export the electric power across the frontiers of the Kingdom as per the relevant regulations.

5- Participate and invest in projects for the provision and supply of fuel for companies partially or totally owned by it according to the prevailing regulations. The company may purchase the fuel required for the production of power for it and its partially or totally owned affiliate companies to serve its objectives.

6- Prepare and adopt the programs and methods necessary for implementing the training and qualification plans for its personnel.

7- Conduct and backup research studies in any of the domains leading to the improvement of service quality, upgrading of performance and operational efficiency, conservation of power consumption, protection of environment, and reduction of costs.

8- Draft, publish, issue, and distribute guidelines, bulletins, information, and data pertaining to the activities undertaken by the company or the services delivered by it.

9- Provide advisory and consultative as well as guidance services in the fields achieving the objectives of the company.

10- Produce water and steam whilst using its facilities in delivering telecom and IT services, billing, collection, and other services relevant to its purposes; whether carried out by the company or by any of its partially or totally owned affiliate companies.

Article (3):

To achieve its purposes, the company may:-

1- Establish or own affiliate companies operating in the fields of generation, transmission, and distribution of the electric power.

2- Establish other companies or participate with other Saudi or foreign companies, bodies or establishments carrying out business activities similar to its activities or to those may helping it achieve its objectives.

3- Own shares or stocks in the companies referred to in paragraphs (1) and (2) above.

4- Undertake all industrial or commercial activities associated with its objectives; such as sales, procurements, leasing, and renting of movable and immovable assets for its own favor or in favor of others.

Article (4) Head Office:

The head office of the company is situated in Riyadh and the Board of Directors may have the right to open branches and offices or agencies inside the Kingdom or abroad.

Article (5) Term of the Company: 

The term of the company is (50) fifty years starting from the date of issue of the ministerial decree announcing the establishment of the company. The term or terms can be extended through a decision of an extraordinary general assembly minimum one year before expiry of the term.

Chapter Two: Capital and Shares

Article (6) Company Capital:

The company capital is (SR 41,665,938,150) – forty-one thousand, six hundred sixty-five million and nine hundred thirty-eight thousand and one hundred fifty Saudi riyals - divided into (4,166,593,815) four thousands, one hundred sixty six millions, five hundreds ninety three thousands, eight hundreds and fifteen equal shares with a par value of SR 10 (ten riyals) each.

Article (7) Shares:

All shares of SEC are nominal and shall not be issued at less than their nominal value. However, the aforementioned shares may be issued at a value higher than their nominal value and in this case the difference in value shall be added to the regular reserve even if it has reached its maximum. The share is indivisible as regards dealing with SEC and if one share is jointly held by several persons, they shall delegate one of them to enjoy on their behalf the rights conferred on them by virtue of the share. Such persons shall be jointly held liable for the obligations arising from the ownership of share. Upon approval of the concerned authorities, SEC may issue premium shares which do not give the right of voting provided that such shares shall not exceed 50% of SEC authorized capital. Moreover, SEC may also issue transferable/ exchangeable indivisible shares or stocks with equal value upon a resolution taken by the ordinary general assembly who may delegate this authority to the Board of Directors.

Article (8) Register of Shareholders:

The shares of SEC are exchangeable and shall be put into circulation upon issuance of a certificate of entering them into the shareholder register prepared by SEC including the shareholders' names, nationalities, positions, residence addresses, total of shares, and their paid amounts.

In the shareholders' register, the share shall be marked and ownership of shares shall be evidenced thereon along with their exchangeability or permissibility of their circulation according to the relevant valid rules and regulations.

Article (9) Certificate of Shares:

The company (SEC) shall issue shares' certificates with serial numbers and shall be signed by the Chairman of the Board of Directors or by any Board member to whom he delegates the authority under the common seal of (SEC). The certificate of shares shall particularly include the number and date of the Royal Decree on the incorporation of SEC as well as the number and date of the ministerial resolution issued on the declaration of the association of SEC, capital value, number of shares, nominal value of share, the amount paid thereof, a brief description of the purposes and objectives of SEC, its head office, in addition to SEC duration/term. There may be coupons for shares carrying serial identifying numbers and including the number of the share with which the coupon is enclosed.

Article (10) Failure to Pay the Value of Share:

In case that the capital is increased and a shareholder fails to pay the share value on the day appointed for payment thereof, the Board of Directors may sell the share in a public tender upon serving a notice on that shareholder by means of a registered-mail letter sent to that shareholder's address mentioned in the shareholders' register, and posting an advertisement in this connection in the local papers. Nevertheless, the aforementioned shareholder who fails to pay on time may have the right to pay, at any time before the date fixed for the tender, the value owed by him along with the expenses incurred by SEC. From the value of sale in the public tender, SEC may deduct its entitled dues and return the remaining amount to the shareholder. If the value of sale does not cover the SEC entitled amounts, then SEC may deduct its remaining dues from the total of the shareholder's amounts. Furthermore, SEC may cancel the sold share and issue to the buyer a new shareholding the identifying number of the cancelled share and this shall be marked in the shareholders' register.

Article (11) Increase in the Capital:

Without prejudice to the provisions of the business companies act, and by virtue of a resolution passed by the extraordinary general assembly upon the consent of the concerned authorities, SEC capital may be increased once or several times by the issuance of new shares with the same nominal value of the original shares provided that the authorized capital has been fully paid. The resolution shall specify the method of increasing the capital and the shareholders shall have priority / preference in subscription to the new shares in cash and such priority / preference shall be announced by being published in three local papers issued in three different regions in the Kingdom in connection with the resolution on the increase of capital and conditions of subscribing / underwriting therein. Each shareholder shall indicate his desire in enjoying his priority right within 15 (fifteen) days from the date of publication.

The abovementioned shares shall be distributed to the original shareholders who have requested to subscribe with a percentage of the original shares owned by them provided that what they attain shall not exceed what they have requested from the new shares the remainder of which shall be distributed to the original shareholders who have requested more than their stake and the distribution shall be proportionate with their owned original shares provided that what they attain shall not exceed the new shares they have requested whilst the remainder shall be launched for public subscription.

In case that there are in-kind stakes upon the increase of capital, then the general assembly shall take the actions stipulated for in the business companies act to verify the assessment of these stakes.

Article (12) Decrease of Capital:

According to a resolution by the extraordinary general assembly based on reasonable justifications and valid rationale, the capital of SEC may be decreased if it is higher than the requirements of SEC or if SEC incurs losses. Such a resolution shall only be issued after reviewing the report of auditor on the reasons necessitating it and on the obligations of SEC as well as the impact of decrease on these obligations without prejudice to the provisions of the business companies’ act. The resolution shall set forth the method of decrease and if it is resultant from the fact that the capital is higher than the requirements, then the creditors shall be invited to voice their objections thereupon within sixty days from the date of publishing the resolution of decrease at least in three daily papers issued at various regions in the Kingdom. If a creditor submits his objection and produces the necessary documentation thereof at the fixed time, SEC shall pay him his debt if it is payable or issue adequate guarantee to pay the same if it is not yet due.

Chapter Three: Board of Directors

Article (13) Formation of Board of Directors:

The management of SEC shall be undertaken by a Board of Directors consisting of nine members to be appointed by the general assembly for three years.

Article (14) Shares Guaranteeing the Responsibilities of Members:

A member of the Board shall be an owner or a representative of an owner of a total number of shares with a nominal value not less than SR 10,000 (ten thousand Saudi riyals) to be deposited within thirty days from the date of appointment of the member at a bank to be designated by the Minister of Commerce and Industry for this purpose. These shares shall be dedicated for ensuring the responsibilities / liabilities of members and shall not be put into circulation till the elapse of the period specified for hearing the invitation for the responsibility stipulated for in the business companies act or till the said case is settled. If a member fails to lodge the guarantee shares within the fixed time limit, then his membership becomes null and void. Members of the Board of Directors, also, shall not participate in any business or any project which may directly compete with the Company businesses. The Company shall not render any kind of cash loans to the Board of Directors members, or, guarantee any kind of loan entered into between the Board of Directors member and third parties.

And the members of the Board of Directors MAY NOT participate in any business or enterprise that would compete with the Company directly. And the Company SHALL NOT provide a cash loan of any kind to the members of the Board of directors or guarantee any loan made by a Board member with the others.

Article (15) Expiration of Tenure of Board Member:

Membership in the Board of Directors terminates by the expiry of the term of office of a member or if that membership becomes invalid according to the relevant prevailing laws and instructions. In case that there is a vacancy in the membership of the Board, then the Board may appoint a substitute member provided that such an appointment shall be passed by the first upcoming general assembly and accordingly the new member may complete his predecessor’s term of office. If the number of members is less than the quorum required for meetings, the ordinary general assembly must be invited for a meeting in the earliest time possible to appoint the required number of members.

Article (16) Jurisdictions of the Board of Directors:

A- Subject to the powers of the general assembly, the Board of Directors shall be vested with as a broad scope of powers as possible to undertake management and supervision of all SEC activities and resources as well as the other dealings and transactions including taking the decisions, concluding the contracts, and carrying out all other actions required to serve the interests of SEC and achieve its objectives. For undertaking its responsibilities, the Board may exercise all its powers and make all necessary actions compliant with the bylaws provided that these actions shall not be within the authorities of the general assembly of shareholders according to the company’s bylaws and the companies Regulation currently into effect. The Board may have the authority to decide upon loans those their terms shall not exceeding the end of the company term. The board shall determine in its respective resolution regarding loans exceeding term of three years, the loan usage and the methods of their payment. The conditions for the loan and guaranties thereof shall not harm the company, its shareholders, or the general guaranties for creditors. Furthermore, the Board may buy, sell, and mortgage the fixed assets, real estates, and movable assets of the company provided that the pertinent justifications, reasons, and rationale shall be clearly stated in the Board’s resolution and that the price shall not be on credit except for utmost necessity and with adequate guarantees and also on condition that the company shall not be harmed or be shouldered with additional obligations resulting from the sale or mortgage, nor shall its activities be totally or partially affected. The Board may claim, file lawsuits, and collect the entitlements of the company and may also accept settlements, reconciliations and arbitration results. In addition, the Board may have the right to acquit the debtors of the company from their obligations towards the company in cases to be determined at the discretion of the Board whose report on this case shall include the reasons and justifications for the decision taken in this connection and the following conditions shall be observed:-

i. Acquittal shall be at least one year after the occurrence of the debt.

ii. The acquittal shall be with a fixed amount as a maximum per year per debtor.

iii. The acquittal is a right conferred in the Board and accordingly it shall not be delegated.

B- The Board may delegate its authority to its chairman or to one or more than one of its members to carry out a specific activity or specific activities within the limits of its authorities. Any of the Company's delegated employees may delegate part or all of his authorities to a third party.

C - The Board of Directors may form a committee or committees to assisting in carrying out its activities, or shall do so when the regulations requisite to be formed within the Company. The Board of Directors resolution deciding on the formation of any of its committees, shall contain the committee' scope of its task, tenure of its works, the extent of its vested authorities and the scheme of the Board supervision on it.

Article (17) Board Members Remunerations:

1- Without prejudice to the regulations and decisions issued in this regard and Article (40/3) of these articles of association, the ordinary general assembly shall determine the share of the Board members in the annual profits as well as the allowance of attending the meetings of the Board and any other benefits.

2- The annual report submitted by the Board to the ordinary general assembly shall include a comprehensive statement of the salaries, recompenses, remunerations, allowances, and other expenses in addition to the payments made to the members of the Board with their capacity as employees and management staff in the company or the payments made to them against their technical, management, or advisory services.

Article (18) Chairman of the Board of Directors:

The Board shall appoint from its members a chairman and a vice chairman who shall be authorized to call for meetings and chair the meetings of the Board and general assembly and also to represent the company before the governmental circles, other companies, individuals, courts, notary public offices, Board of Grievances, offices for settling the securities disputes, arbitration committees, chambers of commerce and industry, labor courts, Sharia courts, civil rights department, police departments, and any other official or judicial parties. For the aforementioned purposes, the chairman or the vice chairman (in case of the absence of the chairman) may have the right for pleading and proceedings, producing evidence, concluding reconciliations and settlements, the right for acquittal, denial, and asking for swearing; all being within the framework of the decisions made by the Board. The chairman may also receive judgments, cassations, and appealing as well as submitting the memorandums, implementing the judgments, signing the bylaws of companies at the governmental authorities, and concluding all documents including the contracts, loan agreements, and other financial agreements, mortgages, rentals, real estate deeds, and issuance of powers of attorney on behalf of the company. The Chairman may have the right to delegate his authorities to any person or persons to carry out specific activities within his abovementioned powers as per an official power of attorney or a duly authenticated written authorization. Moreover, the Chairman may exercise any other duties assigned to him by the Board or stipulated for in these articles within the framework of the works of the company and he may exercise these authorities within or outside the Kingdom.

Article (19) Chief Executive Officer (CEO):

The Board shall appoint a chief executive officer / president other than its members to undertake implementation of the decisions of the Board, carry out the day-to-day activities of the company, and manage the personnel of the company under the surveillance of the Board. The CEO may have powers to be determined by the Board and may have the right to delegate his authorities to any person to achieve a specific job.

Article (20) Board Secretary:

The Board shall appoint a secretary (trustee) from its members or elsewhere and shall also determine that secretary’s authorities, rewards, and working-conditions. The jurisdictions of the secretary (trustee) shall include the preparation of the minutes of meetings as well as the reports and decisions of the Board which shall be kept in a register to be dedicated for that purpose.

Article (21) Tenure of Memberships:

The term of office of the Chairman, Vice Chairman, and Secretary (trustee) as board member shall not exceed the duration of their membership in the Board. However, they may be re-appointed.

Article (22) Meetings of Board Members:

The Board shall hold meetings upon an invitation of its chairman whenever it is deemed appropriate for the interest of the company, which they should not less than four meetings. The Chairman shall call for a meeting when asked by two members of the board. The chairman shall deliver the said invitation by registered mail or by hand or by any other means of communication at least two weeks ahead of the meeting if so requested by two members of the board. of necessity any Board member may participate in any of the Board meeting via telephone or conference video   or by any other electronic way that will enable a instantaneous connection between all members, such way of participation should be considered as attendance of the meeting.  The meeting shall be held at the head office and may also be held outside the premises of the company. The Board shall meet at least four times during a single fiscal year.

Article (23) Quorum, Representation, and Decisions:

1- Quorum and Representation:

The meeting of the Board shall not be valid unless attended by six members of the Board either as original members or by proxy; provided always that the number of original present members shall not be less than five members. The member of the Board may deputize another member to attend the meetings of the Board according to the following criteria:-

a. The member shall not deputize for more than one member in attending the same meeting.

b. The said proxy shall be in writing.

c. The deputy member may not vote on the resolutions which the regulations ban the deputizing member from voting on.

2- Decisions:

The resolutions of the Board of Directors shall be passed by the majority of votes of members present in the meeting in person or by proxy. In case of an equality of votes, the vote of the chairman shall be the casting vote. If it is deemed necessary, the Board may issue resolutions by showing them to each of its member separately unless a member submits a written request for holding a meeting by the Board for deliberation on the said resolutions. In this case, the resolutions shall be submitted to the Board in the first meeting following the adoption of such resolutions.

Article (24) Minutes of Board Meetings:

The deliberations and resolutions of the Board shall be included in minutes and signed by the Chairman and present members as well as those represented in the meeting. These minutes shall be entered in a special register to be signed by the Chairman and secretary.

Chapter Four: Shareholders General Assembly

Article (25) Venue and Presence of General Assembly Meeting:

25/1 The Shareholders’ General Assembly shall convene at the city where the company’s head office is located.

25/2 Each shareholder having at least twenty shares shall have the right to attend the ordinary and extraordinary meetings of the General Assembly. A shareholder may delegate another shareholder - other than the members of Board of Directors or those permanently assigned to undertake technical or administrative jobs in favor of SEC - to attend the General Assembly on his behalf.

Article (26) Ordinary General Assembly of Shareholders:

With the exception of the matters falling under the power of the Extraordinary General Assembly, the Ordinary General Assembly shall have the powers related to all the affairs of the company, and shall convene at least once a year within the period prescribed by the Companies Regulation. Other meetings of the General Assembly may be invited for whenever needed.

Article (27) Extraordinary General Assembly of Shareholders:

The Extraordinary General Assembly shall have the power of amending bylaws of the company with the exception of the provisions thereof that are prohibited to be amended pursuant to the relevant laws and regulations. In addition, the extraordinary General Assembly may decide on the matters falling within the powers of the ordinary General Assembly according to the same terms and conditions applicable on the latter.

Article (28) Method of Calling for General Assembly Meetings:

The General Assembly shall convene upon an invitation by the Board of Directors which shall also invite the General Assembly if so requested by the auditor or a numbers of shareholders whose shareholdings represent at least 5% of the capital. The invitation to the meeting of the General Assembly shall be published in at least three daily newspapers circulated within the various areas of the Kingdom at least twenty five days before the date scheduled for such meeting of at least (25) twenty five days. The Invitation to such meeting may be sent via registered mail and shall include the agenda of the meeting. A copy of such invitation shall be sent to the General Department of Companies, the Ministry of Commerce and Industry within the time specified for publishing thereof.

Article (29) Register of General Assembly Attendance:

Upon convening of the General Assembly, a list shall be made indicating the names, addresses and number of shareholdings of , and number of votes allocated to, the attending shareholders and representatives either present in person or by their representatives under due power of attorneys. Stakeholders may have the right to review the said list.

Article (30) Ordinary General Assembly Quorum:

A meeting of the ordinary General Assembly shall only be valid when attended by shareholders representing at least half the capital of the company. If such a quorum is not available, an invitation shall be addressed for a subsequent meeting scheduled to be held within thirty days following the date of the one deemed as invalid. Such invitation shall be published as provided in these bylaws. Such a delayed meeting shall be valid regardless of the number of shares represented therein.

Article (31) Extraordinary General Assembly Quorum: 

A meeting of extraordinary General Assembly shall only be valid when attended by shareholders representing at least half the capital of the company. If such a quorum is not available, an invitation shall be addressed for a subsequent meeting according to the same conditions as provided above. Such a delayed meeting shall be valid when attended by shareholders representing at least 25% of the capital of the company.

Article (32) Rights of Voting:

Votes in the ordinary or extraordinary General Assembly shall be based on one vote per share. A cumulative voting should be used when voting on the selection the Board of Directors members. Members of the Board of Directors shall not vote in person or by proxy on the General Assembly’s decisions associated with their acquittal for their term of office, or, when granting them permissions required to carry out some businesses which involving personal interests, or, when renewal of these permissions.

Article (33) Resolutions:

33/1 Resolutions made at the meetings of ordinary General Assembly shall be based on the absolute majority of the shares represented therein.

33/2 Decisions made in the meetings of extraordinary General Assembly shall be based on a majority equal at least two thirds the shares represented therein unless the decision relates to increasing or decreasing the capital or extension or lessen of the term of company or dissolution thereof prior to the expiry date specified in the or in case of merging it into another company or institution in which case related decisions shall only be valid when taken by a majority constituting at least three fourth the shares represented in the meeting.

Article (34) Rights of the Shareholders in the General Assembly Meetings:

Every shareholder shall have the right to discuss the issues included in the agenda of the General Assembly meeting and question thereon the members of the Board of Directors and the auditor. The members of the Board of Directors or the auditor shall respond to the questions and queries posed by the shareholders within the extent that involves no risk to the company interests. If a shareholder feels that a response provided to his question is not convincing, he shall refer thereon to the General Assembly whose decision thereon shall be binding.

Article (35) Procedures of General Assembly:

The General Assembly shall be chaired by the Chairman or, if absent, by his delegate. The Chairman shall appoint a secretary for the meeting and one or two person(s) to collect the votes. A minutes of the General Assembly meeting shall be made and include the names of present shareholders or their representatives in person or under power of attorney, number of their shareholdings and their respective votes, the decisions taken in the meeting and number of approving votes and number of disapproving ones, an adequate summary of the discussions made in the meeting. Such minutes of meetings shall be regularly recorded following every meeting in a special register and shall be signed be the Chairman of the Assembly, its secretary and its votes collector(s), copies of these documents shall be delivered to the General Companies Department – the Ministry of Industry and Commerce within a month of the date of the General Assembly meeting.

Chapter Five: The Auditor

Article (36):

The General Assembly shall annually appoint one or more auditors duly licensed to practice their profession in the Kingdom, and shall designate their remunerations. Such auditors may also be reappointed according to the relevant criteria.

Article (37):

An auditor shall have at any time the opportunity to access the books, records and other documents of the company, and may require all data, explanations and clarification deemed as necessary to obtain them. He may verify physical existence of the assets and liabilities of the company.

The auditor shall submit to the annual meeting of the General Assembly a reports containing the position of the company as regards enabling him to obtain the data, information and clarification he required, and his findings related to any contraventions with the provisions of the Regulations of the Companies or the company’s bylaws, and his opinion on how far the accounts of the company reflect the actual realities of the company.

Chapter Six: Accounts and Distribution of Profits

Article (38) Fiscal Year:

The financial year of the company shall start on the first of January and end at the end of December every year. However, the initial financial year shall start on the date of the Ministerial Decision authorizing the institution of the company and end on 31 December of the subsequent year.

Article (30) Annual Accounts:

The Board of Directors shall prepare, at the end of every financial year, an inventory showing the amount of the assets and liabilities of the company on such date, and also prepare the financial statements of the company and a report on its business and its financial position for the elapsed financial year. Such report shall also indicate the way it proposes to distribute the net profits at least sixty days before convening the ordinary General Assembly. The Board shall provide such documents at the disposal of the auditor at least fifty five days before the time scheduled for convening the General Assembly. Such documents shall be signed by The Chairman and deposited in the company head office at the disposal of the shareholders at least twenty five days before the scheduled time for convening the General Assembly. The Chairman shall publish, in three daily newspapers circulated in the various areas of the Kingdom, the company’s financial statements and an adequate summary of the report of the Board of Directors and the full text of the auditor’s report, and shall send a copy of such documents to the General Department of Companies at least twenty five days before the scheduled time of convening the ordinary General Assembly.

Article (40) Distribution of Annual Profits:

The net annual profits – after deduction of all general expenses and other costs – shall be distributed as follows:-

40/1 As much as 10% of net profits shall be set aside for the purposes of forming a statutory reserve. The ordinary General Assembly may discontinue such retention when the said reserve amount becomes equal half the total capital. The company may retain a percentage not exceeding 10% of the net profits to form another additional reserve or to be allocated for a certain purpose or certain purposes.

40/2 .Without prejudice to the provisions of Para (2) of Item (Secondly) of the Cabinet Decree no. 169 dated 11/08/1419, the remaining balance shall be distributed afterwards as a first installment for shareholders at a percentage not less than 5% of the paid-up capital.

40/3 The board members remunerations shall be decided according to the prevailing bases and instructions after deduction of the expenses, consumables, and reserves decided by the General Assembly in compliance with these bylaws or the Companies Regulation and after distribution of profits not less than 5% of the capital to shareholders according to the provisions of Companies Regulations and instructions issued by the Ministry of Commerce and Industry.

40/4 The balance thereafter shall be either distributed to the shareholders as a second dividend or posted to the retained profits account as per decision of the General Assembly.

Article (41) Profit Shares:

The dividends to be distributed to the shareholders shall be paid to the shareholders at such location and timing as may be specified by the Board of Directors according to the instructions of the concerned authorities in this regard.

Article (42):

If the losses of the company amounted three quarters the capital, the Board of Directors must invite the extraordinary General Assembly to consider whether the company is to continue or is to be dissolved prior to its term as defined in these bylaws. In either case, the decision made by the General Assembly in this respect shall be published in three daily newspapers issued in various regions in the Kingdom.

Article (43):

Every shareholder shall have the right to file liability lawsuit against the members of the Board of Directors if they commit a fault which may harm such a shareholder provided that the right of the company to file the case is still valid and the shareholder shall in this case notify the company with his intention to bring the case before the court.

Chapter Seven: Dissolution, Winding up, and Liquidation of the Company

Article (44):

In case of expiration of the term of the company or in case of dissolution thereof prior to such expiration for any reason, the extraordinary General Assembly, pursuant to a proposal of the Board of Directors, shall decide the way of liquidation, appoint one or more liquidators and determine their powers and remunerations. The authority of the Board of Directors shall expire at the expiration of the company, but it shall continue the management of the company until the liquidator is appointed, and all departments of the company shall continue their functions up to the extent that do not conflict with the functions of the liquidator(s).

Article (45):

This bylaw shall be maintained and published according to the provisions of the Companies Regulation.