2nd Principle: Formation, Appointment and Board Affairs
| No: 42081293 |
Effective from 2021-06-30 - Jun 29 2021
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| 7. | The bylaws of the financial institution shall specify the number of members in proportion to its size and the nature of its business, taking into account the following: | |
| a. | The number of members shall not be less than five and not more than eleven.2 | |
| b. | The number of independent members shall not be less than two members, or one third of the Board members, whichever is greater. | |
| c. | The number of executive members shall not exceed two. | |
| 8. | The General Assembly shall elect Board members for the period stipulated in the bylaws of the financial institution, provided that their term membership does not exceed three years; these members may be reelected unless the bylaws of the financial institution stipulate otherwise. | |
| 9. | The procedures for nominating and selecting Board members shall be clear-cut and explicit, and shall observe the diversity of experiences, qualifications, and qualities referred to in the first principle. | |
| 10. | Members shall choose a non-executive member to serve as the Chairman of the Board3 and another as his deputy, provided that the Chairman and his deputy do not exercise any of the functions of the executive management. | |
| 11. | The Board shall conduct an annual evaluation of the extent of independence of the independent member, and shall ensure that there are no relationships or circumstances that affect or may affect his independence; the member shall also inform the Board in the event that circumstances affecting his independence may arise. | |
| 12. | A written no-objection letter shall be obtained from the Central Bank prior to nominating any member of the Board and its committees, or appointing any of the holders of leadership positions, in accordance with the relevant Central Bank instructions. The Central Bank shall be notified in writing upon accepting the resignation/departure from work/termination of service of any holder of a leadership position, the termination of membership of any member of the Board and its committees, or the independent member’s loss of independence, within five working days. | |
| 13. | A member may not become a member of the board of directors of a similar financial institution operating inside the Kingdom. | |
| 14. | A member may not become a member of the board of directors of more than five joint stock companies listed on the stock market simultaneously; in the event of a conflict of interest, said member shall be subject to the conflict-of-interest policy. | |
| 15. | A member may preferably retain his membership for a period not exceeding 12 consecutive or inconsecutive years. | |
| 16. | Any person who wishes to nominate himself for Board membership shall disclose to the Board and the General Assembly any of the following cases of conflict of interest: | |
| a. | If he has a direct or indirect interest in the businesses and contracts made for the benefit of the financial institution wherein he desires to be nominated as a board member; and/or | |
| b. | If he engages in a business that may compete with the financial institution or with any of its activities. | |
| 17. | Each member shall immediately inform the Board of any direct or indirect interest he has in the businesses and contracts executed for the financial institution’s account, and shall not participate in voting on the decision to be taken in this regard. | |
| 18. | Each member shall maintain the confidentiality of the information of the financial institution, and shall not disclose any information that he has been privy to through his Board membership to third parties, or to any of the shareholders of the financial institution, unless such disclosure takes place during the General Assembly meetings. | |
| 19. | Each member shall be presented with an induction program that explains the mission, strategic objectives and activities of the financial institution, and with a memorandum explaining the duties and responsibilities of his membership. | |
| 20. | Members shall carry out the tasks and responsibilities assigned to them through explicit and appropriate procedures; the Board shall review the effectiveness of these procedures on an ongoing basis, and shall identify weaknesses and make the necessary changes whenever required. | |
| 21. | Members shall be aware of the rules, regulations, and instructions related to the financial institution's business, and shall keep pace with any new developments in this regard. | |
| 22. | The Board shall hold at least four meetings per year, with one meeting every three months, in order to exercise its duties and responsibilities effectively. Meetings shall also be held whenever required. Nonexecutive and independent members may preferably hold closed meetings without the attendance of the executive board members, by at least one meeting per year. | |
| 23. | Board meetings shall only be valid if attended by half the members, provided that the number of attending members be not less than three, unless the bylaws of the financial institution provide for a larger number. All decisions shall be made by the majority votes of the members; in case of a tie, the Chairman of the Board shall have the casting vote. | |
| 24. | Members shall attend Board meetings regularly, and may do so by technological means; they shall only be absent with an acceptable reason to be reported to the Chairman of the Board in advance. In the event that a member fails to attend three meetings per year without a valid reason, another member shall be appointed to replace his membership. | |
| 25. | The Board shall draft meeting minutes wherein to note the meeting place, date, beginning and ending time, names of attending and absent members, names of attendees from outside the Board, including an external party such as an external auditor or an internal party such as the financial manager, and a statement of the meeting discussions and deliberations, and the reservations expressed - if any - together with an explanation of the reasons. The meeting minutes shall be signed by all attendees, attested with the decisions and voting results, and kept in a special and organized register. | |
| 26. | The Board shall, at the beginning of each year, set a specific schedule for receiving reports from committees and internal and external auditors, and shall ensure that the mechanism for drafting, collecting, and submitting reports is appropriate and consistent with the approved internal policy, including submitting same to the Board at the due times. | |
| 27. | The Board shall appoint a secretary from among its members or others, and shall determine the conditions to be met by him. He shall hold a university degree in law, finance, accounting, or administration - or its equivalent - and shall have relevant practical experience of not less than three years. In the event that he does not hold a university degree in any of these disciplines, he shall have at least five years of relevant work experience. | |
| 28. | The Board secretary shall perform his responsibilities as per the directives of the Chairman of the Board. He may not be dismissed except by a decision of the Board. His responsibilities shall particularly include the following: | |
| a. | Draft the meeting minutes of the Board, wherein to note the meeting place, date, beginning and ending time, names of attending and absent members, names of attendees from outside the Board, including an external party such as an external auditor or an internal party such as the financial manager, and a statement of the meeting discussions and deliberations, and the reservations expressed - if any -together with an explanation of the reasons. The minutes shall be signed by all attendees, attested with the decisions and voting results, and kept in a special and organized register; | |
| b. | Retain the reports submitted to the Board and the reports drafted thereby; | |
| c. | Inform the members of the dates of Board meetings well in advance of the specified date; | |
| d. | Provide the members with the meeting agenda, working papers, documents and relevant information, as well as any additional documents or information requested by any member in relation to the topics included in the meeting agenda; | |
| e. | Ensure that the members comply with the procedures approved by the Board; | |
| f. | Submit draft minutes to the members to express their opinions thereon prior to signing same; | |
| g. | Ensure that the members have full and prompt access to a copy of the minutes, as well as to the information and documents related to the financial institution; | |
| h. | Regulate the disclosure register of the members and the executive management; and | |
| i. | Follow up on Board recommendations pursuant to a mechanism to be approved by the Board. | |
| 29. | If a member resigns and he has comments on the performance of the financial institution, he shall submit a written statement to the Chairman of the Board. Said statement shall be presented to the rest of the members, and a copy thereof shall be furnished to the Central Bank. | |
2 As for banks, the number of Board members shall not be less than nine, and not more than eleven, as per the best applicable practices.
3 As for banks, this member would rather be independent, as per the best applicable practices.