Investigating the Existence of Dual Company Laws in Saudi Arabia and Their Effectiveness in Protecting the Rights of Partners and Shareholders

Abstract

This dissertation advances an argumentative exploration of the intricate dual company laws governing businesses in the Kingdom of Saudi Arabia and their consequential impact on safeguarding the rights of partners and shareholders. By closely examining the coexistence of Islamic Jurisprudence and the Saudi Companies' Law, this study delves into fundamental questions that navigate the interplay between traditional Islamic business associations and contemporary corporate forms in Saudi Arabia. The central argument of this research revolves around the integration of forms of business associations recognized in Islamic Jurisprudence into the Saudi Companies' Law, questioning the extent to which traditional Islamic principles are reflected in the modern legal framework. Drawing parallels between traditional Islamic business associations and their contemporary counterparts, the study explores the fundamental rights, protections, duties, and liabilities of partners within the framework of traditional Islamic business associations. It uncovers the ethical and legal underpinnings of these associations under Islamic Law, shedding light on contemporary challenges such as the right to unilaterally revoke a company, legal personality, and Limited Liability Doctrine. Moreover, the dissertation critically examines the Saudi Companies' Law 2015 (SCL) and its treatment of shareholders' and partners' rights and protections. Using the Delaware General Corporation Law and the Model Business Corporation Act as benchmarks, the study identifies gaps in shareholders' and partners' rights and protections, arguing for measures to enhance corporate governance and stability. A key argumentative focus of the dissertation is the vagueness and ambiguity within the management liability provisions of the SCL. Assessing their impact on corporate governance and the accountability of directors and managers, including senior managers, for mismanagement and misconduct, the dissertation argues for clarity in these provisions. The role of Saudi Courts in addressing management liability is critically scrutinized. Furthermore, the dissertation explores the existence of fiduciary duties within the SCL, particularly the duty of care and good faith, making arguments about their importance in enhancing corporate governance. It examines implied fiduciary duties and their relevance, alongside exploring the existence of fiduciary duties in Islamic Law. The study also argues for a nuanced understanding of how Saudi courts interpret and apply these duties in cases where they are not explicitly recognized in the Saudi Companies Law. In sum, this dissertation argues for a comprehensive exploration of dual company laws in Saudi Arabia, seeking to illuminate the legal landscape governing business associations, enhance the protection of partners' and shareholders' rights, and foster corporate governance conducive to business stability and prosperity in the Kingdom.