Date of Award

2019

Document Type

Dissertation

Degree Name

Doctor of Juridical Science (SJD)

Abstract

Saudi Arabia has been focused on diversification of its economy and attracting foreign investors. Countries that provide strong shareholder protection are more likely to attract foreign investors. However, there is a need for greater protection of minority shareholders in Saudi Arabia. This is because Saudi’s companies law fails to equip minority shareholders with adequate protective rights. A current issue with the new Saudi companies law can be linked to derivative suit, which is very important for both foreign investors and local investors. Derivative suit in Saudi Arabia is very limited and difficult to pursue because under article 79 of Saudi Companies Law derivative suits can be exercised only if the shareholder obtains permission from the general assembly. If such permission is not obtained, the shareholder may file a tort claim in his/her own name and at his/her own expense. This is problematic because Saudi Arabia market is a concentrated ownership market where family owned businesses are dominant.

In this research, I propose that the Saudi companies law should be amended and remove the requirement for approval from the general assembly to file a derivative suit in the case that the company does not use its right to file the suit. Also, the courts should has the right to scrutinize the case to determine whether a claim has merits or not before the shareholder proceed with the case. In addition, shareholders who filed a derivative suit should recover costs so that the award of damages were not strictly for the company.

I will support my arguments by analyzing existed published empirical studies on minority shareholder’s protections and derivative suit. I hope that my research will contribute to the scholarship of minority shareholders and derivative suit.

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