The Related-Party Reckoning: What Saudi Arabia’s Companies Law Means for Related-Party Transactions

What Do Saudi Arabia’s Related-Party Rules Now Require?

A transaction between a Saudi company and one of its own directors, officers or significant shareholders now requires documented board-level disclosure and, above defined thresholds, shareholder approval before it proceeds. The obligation sits in the Companies Law issued under Royal Decree No. M/132, and it was sharpened in July 2026 when the Capital Market Authority approved a comprehensive amended Implementing Regulation for listed joint stock companies by Resolution No. 2026-44-3, published in Umm Al-Qura on 3 July 2026. That regulation consolidates the rules across the corporate lifecycle, including related-party transaction licensing, and it elaborates directors’ duties of care and loyalty: acting in good faith for the company and all shareholders, exercising independent judgment, avoiding conflicts, and disclosing any direct or indirect interest in the company’s business and contracts as soon as the director becomes aware of it. Where those duties are tested, the board independence a company claims on paper is measured against what it can actually evidence.

The shift is procedural rather than philosophical. A transaction once approved verbally in a family meeting, or waved through because everyone already understood the arrangement, now needs a documented conflict declaration, minutes that record genuine deliberation, and, where the threshold is met, a shareholder vote from which the conflicted party is excluded. Nothing about that is exotic. It is the same discipline the region’s family business governance structures have been moving toward for years, now carried by statute instead of goodwill. What makes this consequential is the counterparty problem. Family-owned structures account for close to 90 percent of private-sector business across the GCC. In a significant share of those companies, the person on the other side of a related-party transaction is also the person chairing the meeting convened to scrutinise it. Regulation cannot dissolve that overlap. It can only require the board to show how the decision was reached.

Why Does This Land Hardest on Founder-Led Boards?

The companies most exposed are not the ones the reform appears aimed at. Multinational subsidiaries and institutionally owned businesses generally already run a related-party approval process, because auditors and lenders have required one for years. The exposure sits with founder-led and family-controlled boards, where the boundary between family decision-making and business decision-making has rarely been drawn formally, and where one individual is frequently chair, largest shareholder and an indirect party to the transaction under review.

This is where the chair’s role becomes load-bearing. A chair who also sets the strategic direction the board is meant to evaluate leaves the board without an independent mechanism to test that direction, and a related-party transaction is the sharpest version of the same structural problem. Disclosure alone does not resolve it. The board needs independent directors with the standing and the information to decline, and a record showing they had a real opportunity to do so. Several of the early warning signs that precede governance failure show up here first: conflicts declared after the fact, minutes that record outcomes without deliberation, and independent directors who are consistently outvoted on matters affecting the controlling shareholder.

How Does the Rest of the GCC Compare?

Saudi Arabia is the most recent mover rather than an outlier, and the mechanisms differ enough to matter.

The UAE distinction is worth holding clearly, because general coverage tends to blur it. The governance regime and the tax regime are separate obligations with different tests and different owners. A UAE board is therefore maintaining two related-party disclosure trails that are rarely reconciled by the same team, one answering to governance expectations and one built around arm’s-length pricing and a connected persons threshold.

The direction of travel is consistent even where the instruments diverge. Related-party dealing is moving from informal, trust-based practice to documented, board-owned obligation with consequences attached. A board treating the Saudi reform as a Saudi problem will be the last to notice when its own jurisdiction’s version arrives, which is the same pattern MEIoD has traced in governance as national strategy across the region’s transformation programmes.

What Should a GCC Board Do Now?

Four things, in order. Document a related-party transaction policy if one does not exist, including what counts as a related party and which thresholds trigger which approval. Require conflict declarations before a transaction is discussed rather than after it is agreed. Ensure minutes record deliberation and the basis for the decision, not only the resolution. And confirm that independent directors, not only the chair, understand when a shareholder vote is legally required rather than discretionary. A corporate governance assessment will show whether a policy exists, whether it is followed in practice, and where conflict disclosure is still informal.

The corporate secretary carries much of the operational load here: maintaining the conflict-of-interest register, sequencing the agenda so a conflicted party is absent for the relevant item, and drafting minutes with the evidentiary quality that regulators in Saudi Arabia, the UAE and Bahrain now expect.

How MEIoD Supports Boards and Investors

MEIoD works with boards, investors and family enterprises across the GCC to build the governance architecture that related-party scrutiny now assumes, before a regulator asks for it.

• CG Assessment: a structured review of governance practice, including whether a related-party policy exists, whether it is followed, and where conflict disclosure remains informal.
• Board Evaluations: an independent assessment of whether independent directors have the standing, information and practical opportunity to challenge a related-party transaction rather than formal independence alone.
• Corporate Directors Program: builds the competencies directors need to recognise a conflict early, document it correctly, and know when a shareholder vote is required.
• The New Shareholder & Stakeholder Dynamic (13 October 2026, 6:00 PM UAE, virtual): examines the shareholder and board relationship that a related-party approval vote puts under direct pressure.

A related-party transaction does not become a governance failure because it happened. It becomes one when nobody can show how it was decided. Contact MEIoD, and we will build the process before a regulator, an investor or a family dispute asks you to produce one.

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