2000 News Story

Distribution of shareholders' profits regulated

The ministerial committee responsible for supervising the circulation of shares in the Kingdom has

endorsed regulations for the regular distribution of profits among shareholders of stock companies in

good financial standing. For the first year, such profit distribution will be biannual, and thereafter

quarterly. The Ministry of Commerce commented yesterday that this regulation reflects a concern that stock

companies implement principles of openness and transparency.

The conditions allowing profit distribution as decided at the recent meeting of the committee are as follows:

  1. The stock company should have a strong financial situation, good regular profits, cash flow, and the ability to predict its level of profits.
  2. The stock company should have accumulated enough profits to be able to cover the proposed profit distribution after subtracting the regular allowances, taxes, and reserves.
  3. The profits realized by the stock company throughout the year should be based on the same accounting bases and have sustained a reasonable level right up to the end of the company's fiscal year.
  4. The financial situation and cash liquidity of the stock company should be capable of allowing it to carry out the distribution.
  5. The board of directors of the stock company is required to include in its annual report the profit percentage distributed during the year, together with the proposed end-of-year profit distribution and the total amount of the disbursed profits.
  6. The stock company should record the disbursement of the realized profits account for the period or the accumulative profits account from the previous years or both; and should observe the regularity of profits distribution percentages according to the abilities and the available cash liquidity of the company. The board of directors is required to declare and announce the profit percentages regularly so the shareholders are aware of them.
  7. The stock company should abide by the procedures of distributing annual profits either by means of checks or through electronic cash transfer based on the committee's 1995 decision in this respect.
  8. The stock company should submit copies of its profit distribution decisions to both the General Department of Companies at the Ministry of Commerce and the Control Department at the Saudi Arabian Monetary Agency (SAMA), and announce them three weeks ahead of the date of the disbursement of the profits.

The Ministry calls on all stock companies that distribute profits regularly to abide by these conditions.