Article 7: Formation of the Shariah Committee 1

No: 41042498

Date(g): 12/2/2020 | Date(h): 18/6/1441

Status: In-Force

The board shall form the Shariah committee and appoint its members, based on the recommendation of the nomination and remuneration committee, after obtaining SAMA’s written non-objection. The bank may obtain the approval of the general assembly to appoint the Shariah committee members if such is stated in the bank internal policy. The term of committee membership is three years. The committee shall be formed according to the following:

1.	The number of its members must be proportionate with the size and nature of the bank business, provided that it is not less than three and not more than five.
2.	The chairperson of the committee shall be an independent member.
3.	The number of the independent members must not be less than two-thirds of the committee members. Independence of a committee member shall be invalidated in the following cases:
	a)	If the member owns five percent or more of the stock of the bank or one of its subsidiaries.
	b)	If the member is a representative of a corporate person who owns five percent or more of the stock of the bank or one of its subsidiaries.
	c)	If the member is a relative of any of the board members or senior executives in the bank or in one of its subsidiaries.
	d)	If the nominated member is a board member in one of the bank’s subsidiaries.
	e)	If the member is currently an employee, or used to be an employee during the past two years, of the bank, of a party that deals with the bank, or of a subsidiary, e.g. an accounting auditor or a main supplier, or held a controlling interest in any of these parties during the past two years.
	f)	If the member has a direct or indirect interest in the business and contracts executed for the bank.
	g)	If the member receives financial consideration from the bank in addition to the remuneration for their membership in the committee.
	h)	If the member has a credit relationship with the bank (credit cards, credit facilities, guarantees, etc.), under his name or the name of a relative, in excess of three hundred thousand Saudi riyals.
	i)	If the member engages in a business that would compete with the bank or conducts businesses in any of the bank's sub-activities.
	j)	If the member served for more than six consecutive years or nine nonconsecutive years as a member of the committee.
	k)	The business and contracts that serve a personal interest of a committee member, which requires a license from the ordinary general assembly, shall not be considered as interest invalidating independence of that committee member if such business and contracts are carried out according to the same terms and conditions adopted by the bank with all contractors and customers and are part of the bank’s usual activities unless the nomination and remuneration committee of the board deems otherwise.
		If independence of any member is invalidated for any reason, the bank shall notify SAMA within five business days.
4.	The bank shall not appoint any member of its committee from a Shariah Committee of another bank operating in Saudi Arabia. This is to ensure that the committee member would be more focused, avoiding conflict of interest, and maintaining the confidentiality of information.
5.	The bank shall include a confidentiality clause in the contract or terms of appointment of the committee members to maintain the confidentiality and secrecy of the bank’s information.
6.	Upon resignation/expiry of the term of membership of any committee member for any reason, the bank must notify SAMA in writing within five business days. The resigning member shall submit his resignation, along with his reasons, to the board with a copy to SAMA. Membership of a committee member may not be terminated before the expiry of its term except with an acceptable justification.

¹ The article is for guidance and will be enforced starting from 01/01/2023.