DEFICIT 13 2.1.12 RISKS RELATED TO THE INCREASE IN THE COMPANY’S CURRENT LIABILITIES AGAINST ITS
G. Non-controlling interest
10.1 Company Incorporation .1 Overview
10
Legal Information
10.1 Company Incorporation
y On 21/04/1415H (corresponding to 26/09/1994G), the extraordinary general assembly of the Company’s shareholders approved an increase in the Company’s capital by (50%) from one hundred million (100,000,000) Saudi Riyals to one hundred and fifty million (150,000,000) Saudi Riyals, divided into Three million (3,000,000) ordinary shares, with a nominal value of fifty (50) Saudi Riyals for each share, by issuing one million (1,000,000) new ordinary shares with a nominal value of fifty (50) Saudi Riyals per share.
y Based on the decision issued by the Capital Market Authority No. 4-154-2006 dated 27/02/1427H (corresponding to 27/03/2006G) based on the decision of the Council of Ministers to divide the shares of public shareholding companies on that date so that the nominal value of one share becomes ten (10) Saudi Riyals instead of fifty (50) Saudi Riyals. Accordingly, the Company’s shares have been divided into fifteen million (15,000,000) ordinary shares, with a nominal value of each share, including ten (10) Saudi Riyals.
y On 16/07/1438H (corresponding to 13/04/2017G), the extraordinary general assembly of the Company’s shareholders agreed to reduce the Company’s capital by (50%) from one hundred and fifty million (150,000,000) Saudi Riyals to the current capital, which is seventy-five million (75,000,000) ) Saudi Riyals divided into seven million five hundred thousand (7,500,000) ordinary shares, with a nominal value of each share, including ten (10) Saudi Riyals, in order to amortize the accumulated losses of the Company.
y On 24/11/1441H (corresponding to 15/07/2020G), the Company’s extraordinary general assembly agreed to increase the Company’s capital through the issuance of preferred shares, and the subscription represented an Offering of ten million (10,000,000) new ordinary shares at an offer price of ten (ten) 10 Saudi Riyals per share with a nominal value of ten (10) Saudi Riyals, in order to increase the Company’s capital from seventy- five million (75,000,000) Saudi Riyals, to one hundred and seventy-five million (175,000,000) Saudi Riyals, and increase the number of shares from seven million five hundred thousand (7,500,000) ordinary shares to seventeen million five hundred thousand (17,500,000) ordinary shares.
y On 06/07/1443H (corresponding to 07/02/2022G), the Board of Directors recommended reducing its capital by an amount of (125.000.000) Saudi Riyals, at a rate of (71.43%) from one hundred and seventy- five million (175,000,000) Saudi Riyals to fifty million (50,000,000) Saudi Riyals by canceling 17.5 million ordinary shares. Thus, the capital is increased by Offering the preferred shares at a value of three hundred and fifty (350,000,000) Saudi Riyals, so the Company’s capital after the increase becomes four hundred million (400,000,000) Saudi Riyals.
y On 22/07/1443H (corresponding to 23/02/2022G), the Company’s extraordinary general assembly approved the Board of Directors’ recommendation to reduce the Company’s capital by (71.43%) from one hundred and seventy-five million (175,000,000) Saudi Riyals to fifty million (50,000,000) Saudi Riyals in order to restructure the Company’s capital to amortize a portion of the accumulated losses, by cancellation of twelve million five hundred thousand (12.500,000) ordinary shares, where (1) share was canceled for (1.4) shares.
y The Company’s current capital is fifty million (50,000,000) Saudi Riyals, divided into five million (5,000,000) ordinary shares with a nominal value of ten (10) Saudi Riyals per share, fully paid in value.
y Headquarter Relocation: On 15/01/1438H (corresponding to 16/10/2016G), the extraordinary general assembly of the Company’s shareholders agreed to change the Company’s head office. Accordingly, the Company’s headquarter was moved from Jeddah to Riyadh with commercial registration No. (1010016722) dated 08/07/1398H (corresponding to 13/06/1978G).
y During the Extraordinary General Assembly meeting on 22/07/1443H (corresponding to 23/02/2022G), it was approved to amend the articles of the Company’s Articles of Association in line with the capital reduction, and the Articles of Association were approved by the Corporate Governance Department at the Ministry of Commerce on 15/10/1443H (corresponding to 16/05/2022G).
y The Company has not uploaded this (latest) version of the Articles of Association on the (Tadawul) website on the Company’s page.
10.1.2 Board of Directors:
10.1.2.1 Formation of the Board of Directors
The Company shall be managed, as per the Articles of Association, by a Board of Directors consisting of seven (7) members elected by the Ordinary General Assembly for a term not exceeding (3) three years. According to the latest amendment to the Company’s Articles of Association on 15/10/1443H (corresponding to 16/05/2022G), the Company is currently committed to the Companies Law issued by Royal Decree No. (M/3) dated 28/01/1437H (corresponding to 11/10/2015G) as amended by Royal Decree No. (M/79) dated 25/07/1439H (corresponding to 11/04/2018G), and the Corporate Governance Regulations issued by the Board of Directors of the Capital Market Authority pursuant to Resolution No. (8-16-2017) dated 16/05/1438H (corresponding to 13/02/2017G), as amended by CMA Board Decision No. 3-45-2018 dated 15/09/1440H (corresponding to 20/05/2019G). The Company’s Articles of Association stipulate that the number of board members shall be seven members elected by the ordinary general assembly. The Company’s Articles of Association also indicate the Company’s commitment to Article (16) of the Corporate Governance Regulations, which oblige listed companies to have the majority of their board of directors from non-executive members and that the number of independent members should not be less than two members or one-third of the board members (whichever is more). The number of non- executive members of the Company’s board of directors is five out of six, and there are three independent members out of six on the board.
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Table No. ( Board’s Member*
The Company’s Board of Directors appointed on 14/10/2021G*
Name Position Membership
status
Nationality
Age
Owned Shares Direct Indirect
Number Percentage Number Percentage
Sultan Salahudin Abdulazim** Chairman of Board of Directors Independent Saudi 42 - - - -
Ibrahim Mohammed Ibrahim Al-Shabib *** Deputy Chairman of the Board Executive Saudi 50 - - - -
Sari bin Ibrahim Al-Mayouf Board’s Member Independent Saudi 43 - - - -
Salman Mohammed Nasser Al-Asmari Board’s Member Non-executive Saudi 44 - - - -
Abdulaziz Najeeb Al-Suwailem**** Board Member and Managing
Director Executive Saudi 31 - - - -
Al-Mu’tasimbillah Zaki Allam Board’s Member Independent Saudi 37 - - - -
Source: The Company
The Ordinary General Assembly, in its meeting held on26/02/1443H (corresponding to 03/10/2021G), approved the election of the above-mentioned members of the Board of Directors for the current session, which started on 08/03/1443H (corresponding to 14/10/2021G) and ends on 10/04/1446H (corresponding to 13/10/2024G).
** The Company’s Board of Directors decided in its meeting held on 27/02/1440H (corresponding to 17/10/2021G) to appoint Mr. Sultan Salahudin Abdulazim as Chairman, and Mr.
Ibrahim Mohammed Ibrahim Al-Shabeeb as Vice Chairman of the Board of Directors.
*** On 02/01/2022G, the Board of Directors approved the assignment of a member of the Board of Directors, Mr. Ibrahim bin Muhammad Al-Shabib, as a managing director of the Company and amended the membership capacity to be an executive member as of 02/01/2022G.
**** On01/03/1444H (corresponding to 27/09/2022G) the Board of Directors decided to appoint a member, Mr. Abdulaziz Najeeb Al-Suwailem as a managing director of the Company and to amend the membership capacity to be an executive member as of 07/03/1444H (corresponding to 03/10/2022G).
10.1.2.2 Chairman, Vice President and Secretary
The Company is committed to the requirements for appointment to these positions in accordance with the Articles of Association and corporate governance regulations, where the Ordinary General Assembly approved on 26/02/1443H (corresponding to 03/10/2021G) to appoint the current members of the Company’s board of directors. On 11/03/1443H (corresponding to 17/10/2021G), the Board of Directors approved the appointment of Mr. Sultan Salahudin Abdulazim as Chairman of the Board of Directors, and Mr. Ibrahim Muhammad Ibrahim Al-Shabeeb as Vice Chairman.
On 30/11/1443H (corresponding to 29/06/2022G), the Board of Directors approved the appointment of the Secretary of the Board of Directors, Mr. Nayef bin Ahmed Al-Ghamdi as Secretary of the Board of Directors for a period of one year, and the decision is effective from the date of its issuance.
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Table No. ( Company’s Board Positions
Name Position Membership status
Sultan Salahudin Abdulazim Chairman of Board of Directors Independent
Ibrahim Mohammed Ibrahim Al-Shabib Deputy Chairman of the Board Executive
Abdul Aziz Najib Al-Suwailem Board Member and Managing Director Non-executive
Sari Ibrahim Abdulkarim Al-Mayouf Board’s Member Independent
Salman Mohammed Nasser Al-Asmari Board’s Member Non-executive
Al-Mu’tasimbillah Zaki Allam Board’s Member Independent
Source: The Company
According to the Articles of Association, the board of directors has the widest powers in managing the Company and disposing of its affairs to achieve its purposes. It has, for example, but not limited to, the right to participate in other companies and to dispose of its assets, property and real estate, and it has the right to purchase, accept and pay the price, mortgage, release the mortgage, sell, convey, collect the price, deliver the price, join and sort property and sukuk according to the conditions specified in the article of association. The board has the right, within the limits of its competencies, to delegate or authorize one or more of its members or third parties to carry out certain work or works, or cancel this authorization or power of attorney in whole or in part.
The board may manage its affairs and supervise its business and financial affairs inside and outside the Kingdom of Saudi Arabia, and prepare policies and guidelines to achieve its objectives and carry out all acts and actions that will achieve the objectives of the Company.
10.1.2.3 Remuneration of Board Members
According to the Company’s Articles of Association, the minimum annual remuneration for the chairman and members of the board of directors is five thousand (5,000) Saudi Riyals, and the maximum is five hundred thousand (500,000) Saudi Riyals annually for each of them in return for their membership in the board of directors and their participation in its work, including any additional rewards in case a member participates in any of the committees emanating from the Board of Directors. In the event the Company achieves profits, a percentage not exceeding (10%) of the rest of the net profit may be distributed after deducting the reserves decided by the general assembly in application of the provisions of the Companies Law and the Company’s Articles of Association and after distributing a profit to shareholders of no less than (5%) of the paid capital, provided however that the entitlement to this remuneration is proportional to the number of sessions attended by the member, and any estimate to the contrary is void. In all cases, the sum of the remunerations and financial or in-kind benefits that a member of the Board of Directors receives shall not exceed five hundred thousand (500,000) Saudi Riyals in accordance with the regulations set by the competent authority. The maximum limit of the allowance for attending the sessions of the Board and its committees is five thousand (5,000) Saudi Riyals for each session, excluding travel and accommodation expenses. Each member of the Board, including the Chairman of the Board, shall pay the value of the actual expenses incurred by them in order to attend meetings of the Board or committees emanating from the Board of Directors, including travel, accommodation and subsistence expenses.
The report of the Board of Directors to the Ordinary General Assembly includes a comprehensive statement of all the bonuses, expenses allowances and other benefits that the members of the Board of Directors received during the financial year. It shall also include a statement of what the members of the Board received in their capacity as workers or administrators, or what they received in return for technical or administrative work or consultancy. It shall also include a statement of the number of Board sessions and the number of sessions attended by each member from the date of the last meeting of the General Assembly. (Please refer to subsection (4.5) “Compensations and Remunerations of Board Members and Senior Executives” of Section (4) “The Company’s Organizational Structure” of this Prospectus).
10.1.2.4 Board Meetings
According to the Company’s Articles of Association, the board of directors meets at least twice a year at the invitation of its chairman. The invitation must be in writing or sent by fax or e-mail accompanied by the meeting agenda at least (5) five days prior to the date of the meeting, unless the circumstances require the meeting to be held urgently. An emergency invitation may be sent to the meeting accompanied by the meeting agenda and the necessary documents and information within a period of less than (5) five days prior to the date of the meeting. The Chairman of the Board shall call the Board to a meeting whenever requested to do so by at least two of the members.
10.1.3 Company Committees
The Company has three sub-committees which are as follows:
y Audit Committee
It consists of four (4) members, and includes the committee’s terms of reference include monitoring the Company’s business. For this purpose, it has the right to review its records and documents and to request any clarification or statement from the members of the board of directors or the executive management. It may ask the board of directors to invite the Company’s general assembly to convene if the Board of Directors obstructs its work or if the Company suffers serious damages or losses. The Audit Committee is also responsible for examining the Company’s financial statements, reports and notes provided by the auditor, and preparing a report on its opinion regarding the adequacy of the Company’s internal control system and the other work it has carried out within its jurisdiction.
The Ordinary General Assembly, in its meeting held on 26/02/1443H (corresponding to 03/10/2021G), approved the formation of the Audit Committee, defining its tasks, rules of work, and remuneration for its members for the new term starting from 114/10/2021G until the end of the session on 13/10/2024G. The following table shows the members of the Audit Committee:
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Table No. ( Members of the Audit Committee
Name Job
Al-Mu’tasimbillah Zaki Allam Committee Chairman (independent member)
Abdulaziz Awajan Al-Rashidi Member (from outside the Board)
Karim Abdelaziz Shnior Member (from outside the Board)
Abdulsalam Majid Al-Banna* Member (from outside the Board)
Source: The Company
The Company announced on the Tadawul website that a member of the Audit Committee, Mr. Abdulsalam Majid Al-Banna, has resigned from his membership in the Company’s Audit Committee, as he submitted resignation on 06/09/2022G. The Board of Directors’ decision was passed on 07/09/2022G, approving the submitted resignation, provided that it takes effect from 07/09/2022G.
The following is a table showing the number of meetings held by the Audit Committee during the last two years up to the date of publication of this Prospectus:
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Table No. ( Audit Committee Meetings
2020 2021 2022*
Nos. of Audit Committee Meetings 4 4 5
Source: The Company
* As of the date of this Prospectus
In accordance with Article (57) of the Corporate Governance Regulations, the Audit Committee meets periodically, provided that its meetings are not less than four during the Company’s financial year.
y Nomination and Remuneration Committee
It consists of three (3) members. The committee’s terms of reference include reporting to the general assembly of shareholders and the board of directors, in addition to its responsibility in dealing with a range of operational and business affairs, including human resources, remunerations and nominations.
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Table No. ( Members of the Nominations and Remunerations Committee
Name Position
Sari bin Ibrahim Al-Mayouf** Chairman
Sultan Salahudin Abdulazim Member
Salman Mohammed Nasser Al-Asmari*** Member
Source: The Company
The following is a table showing the number of meetings held by the Nomination and Remuneration Committee during the last two years up to the date of publication of this Prospectus:
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Table No. ( Nomination and Remuneration Committee Meetings
2020 2021 2022*
Number of Nomination and Remuneration Committee Meetings 1 4 2
Source: The Company
* As of the date of this Prospectus
Pursuant to Article (50) of the Corporate Governance Regulations, the Nominations and Remunerations Committee meets periodically at least every six months. It is clear from the minutes of the meetings of the Nominations and Remunerations Committee for the year 2020, that the Company does not meet the minimum requirements by law for the meetings of this committee.
y Executive Committee
Executive Committee is composed of (3) members. Its members were appointed by the Board of Directors in accordance with the Board of Directors’ decision issued on 17/10/2021G. As of the date of the Prospectus, the Executive Committee has not been activated and the Committee’s work regulations have not been approved. Further, the Committee has not undertaken any work and has not held any meeting.
10.1.4 Executive Management
The following table shows the Company’s executive management details:
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Table No. ( The Company’s Executive Management
Name Position Nationality Age Date of Seniority
Owned Shares
Direct Indirect
Number Percentage Number Percentage
Mazen Mohammed Nasser
Al-Asmari CEO Saudi 51 14/06/2021G - - - -
James Wallis Graham Morey Senior Executive Vice
President British 62 01/10/2015G - - - -
Majid Muhammad Hassan
Balkhi Head of Retail Sector Saudi 42 18/12/2022G - - - -
Ayman Muhammed
Abdulrahman Suleiman Finance Manager Egyptian 45 01/10/2012G - - - -
Faisal Mohsen Hussein Al-Attas Director of Legal Affairs Saudi 31 06/12/2022 - - - -
Nayef bin Ahmed Al-Ghamdi Board Secretary Saudi 39 22/ 05/2022G - - - -
Vacant* Head of HR and
Administrative Affairs - - - - - - -
Source: The Company
* The company is in the process of appointing a head of human resources and administrative affairs.
10.1.5 Corporate Governance
Corporate Governance Regulations in the Kingdom of Saudi Arabia issued by the Board of the Capital Market Authority pursuant to Resolution No. 8-16-2017 dated 16/05/1438H (Corresponding to 13/02/2017G). Based on the Companies Law issued by Royal Decree No. M/3 dated 28/01/1437H. as amended by the decision of the Board of the Capital Market Authority No. 1-57-2021 dated 01/06/1442H (corresponding to 14/01/2021G). A corporate governance guideline was developed and approved by the Company’s general assembly.
As of the date of this Prospectus, the Company is committed to the mandatory articles of the corporate governance regulation set by the Capital Market Authority, with the exception of the Company’s failure to comply with the corporate governance regulation for listed companies and the regulations for the Company’s management, as the work regulation of the Nominations and Remuneration Committee approved by the Company’s general assembly on 16/07/2017G did not include the remunerations of its members, and the failure of the General Assembly to adopt the remuneration policy for the Board of Directors, the committees emanating from the Board and the Executive Management; Violating some of the requirements of Paragraph (B) of Article Sixty, Paragraph (B) of Article Sixty-four, and Paragraph (1) of Article Sixty-first of the Corporate Governance Regulations. The Company’s Nomination and Remuneration Committee was not committed to holding meetings periodically at least every six months during the financial year ending on 03/31/2021G, as the Committee held only one meeting on 31/03/2021G, in violation of some of the requirements of Paragraph (7) of Article 50 of the Corporate Governance Regulations.