Towards legal reform of Saudi law of directors’ duties and of enforcement by derivative action

Aleshaikh, Abdullatif Mohammed (2018) Towards legal reform of Saudi law of directors’ duties and of enforcement by derivative action. PhD thesis, University of Glasgow.

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Directors’ duties of care and loyalty and their enforcement by derivative action, are
important elements in the company law system. Such mechanisms are introduced to ensure
that directors are subject to a satisfactory level of accountability and control while
managing a company. This research employed the comparative law approach to identifying
problems in, and to proposing reform for, the Saudi Arabian law of directors’ duty to act
with care and in good faith in the company’s general interests, and to avoid conflicts of
interest, with particular focus on the corporate opportunities and self-dealing transactions
and the Saudi law of derivative actions.

The main objective of this study was to propose a reform of Saudi law of directors’ duties
and of derivative actions. By using the company law of the United Kingdom (UK) as
benchmark, this study evaluates the clarity, certainty and accessibility of Saudi law and
identifies weaknesses and deficiencies. The feasibility of transplanting selective legal ideas
and rules from the UK company law to its Saudi counterpart in order to develop a
framework for legal reform in Saudi Arabia is examined.

The argument here is that the Saudi law of directors’ duties of care and loyalty and
derivative actions suffers from serious deficiencies, despite the introduction of the new
Companies Law of 2015. While the new Saudi Corporate Governance Regulations 2017
have tackled some issues in the areas of directors’ duties, there is still room for
improvement. The uncertainty in the law of directors’ duties and enforcement is sufficient
in itself to justify the reform of law. Moreover, the limits of other legal and non-legal
mechanisms of accountability in the Saudi context suggest that alternative mechanisms
would not adequately ensure the accountability of directors.

Throughout the examination of the feasibility of reform by way of legal transplantation, the
study takes into account that the UK legal model is only transferable if it can be adapted to
fit within the institutional structure and legal environment in Saudi Arabia. This is
necessary to ensure proper reception of foreign rules by the new environment of the host
country. The finding is that transferability of most UK legal models and rules is feasible.
Throughout this consideration of a reform agenda for the Saudi law of directors’ duties and
derivative actions, the research has been guided by a policy that requires striking a balance
between the need to increase directors’ accountability and the need to protect the directors’
exercise of their managerial authority.

Item Type: Thesis (PhD)
Qualification Level: Doctoral
Keywords: Directors' duties, derivative action, corporate governance, legal transplant, comparative law, Saudi company law, UK company law.
Subjects: K Law > K Law (General)
Colleges/Schools: College of Social Sciences > School of Law
Supervisor's Name: MacNeil, Professor Iain
Date of Award: 2018
Depositing User: Mr. Abdullatif Aleshaikh
Unique ID: glathesis:2018-30630
Copyright: Copyright of this thesis is held by the author.
Date Deposited: 11 Jun 2018 12:13
Last Modified: 25 Jul 2018 08:39

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