Student?s Name
1.2 Problem Statement
The Saudi Arabian New Companies Regulations (the New Regulations) were officially gazetted and came into force on May 2, 2016. The need to amend the corporate legislation in the Kingdom of Saudi Arabia (KSA) was occasioned by the need to resolve the contentious issues in the previous law, which had made KSA unattractive to foreign investors. These included investment structures, issues regarding equity and debt financing, board responsibilities, as well as protection of shareholder rights. The new corporate law seeks to create a more conducive business environment for both Saudi citizens as well as foreign nationals.[Suhaib Hammad Hammad, and Al-Mehdar. ?Doing business in Saudi Arabia: overview.? Practical Law Country Q&A 0-520-4520 (2019): 1-26.] [Salman M. Al-Sudairi. ?Saudi Arabia Issues New Regulations for Companies, Altering Regulatory Landscape.? Latham & Watkins Corporate Governance Practice no. 1911 (2015): 349-358.]
1.2.1 Protection of Third Party Interests
In a one person (single member) limited liability companies (OPLLCs), article 154 section 1 of the New Regulations states that the owner of such a company has the powers of a director, the general assembly of partners, and the board of directors of the firm. In addition, the shareholder has the powers to appoint one or more directors to act as the company?s representatives in litigation matters, management of the company affairs, as well as arbitration tribunals and third parties. This section gives sweeping powers to the shareholder in the governance and management of the firm, in addition to the rights of a limited company against personal liability. However, these rights and privileges can be abused by unscrupulous business people, who might take advantage of their limited personal liability to abuse the company finances for personal gains, thereby putting at risk third party investment into the company. In the event that were to happen, creditors and other third parties to the company would lose their hard earned money putting them at a disadvantage. The new law has addressed this possibility in article 155 of the New Regulations.[Kingdom of Saudi Arabia Companies Law, Article 154, Section 1.] [Kingdom of Saudi Arabia Companies Law, Article 154, Section 1.] [Steven M. Dickinson. ?Introduction to the New Company Law of the People?s Republic of China.? Pacific Rim Law & Policy Journal 16 (2007): 1?10.]