Directors Service Agreement Template for Saudi Arabia

When appointing directors to your company's board in Saudi Arabia, you need a comprehensive Directors Service Agreement that balances regulatory compliance with practical governance needs. This critical document establishes the legal foundation of your director's appointment, outlining their duties, compensation, and obligations under Saudi law while protecting both your company's interests and the director's rights.

When do you need this document?

You require a Directors Service Agreement whenever you appoint new board members to your Saudi company, whether it's a Joint Stock Company or Limited Liability Company. This includes situations where you're expanding your board composition, replacing departing directors, or establishing governance structures for newly incorporated entities. Listed companies particularly need these agreements to demonstrate compliance with Capital Market Authority regulations during regulatory reviews. The document becomes essential when onboarding independent directors to meet corporate governance requirements, appointing executive directors with dual management roles, or when foreign investors require formal director representation on your board.

Key legal considerations

Your Directors Service Agreement must address several critical legal elements to ensure enforceability and compliance. The appointment terms should clearly define the director's classification as executive or non-executive, their specific duties under Saudi Companies Law, and any committee memberships or special responsibilities. Remuneration clauses need careful structuring to comply with regulatory caps and approval requirements, particularly for listed companies where shareholder approval may be mandatory. Confidentiality provisions must protect sensitive corporate information while allowing directors to fulfill their statutory duties. The agreement should include robust indemnification clauses protecting directors from personal liability when acting within their authority, though these cannot cover willful misconduct or regulatory violations. Termination provisions require particular attention, as they must comply with both contractual terms and statutory removal procedures under Saudi Companies Law.

Legal requirements in Saudi Arabia

Under Saudi Companies Law 2015, your Directors Service Agreement must ensure directors understand their fiduciary duties, including loyalty, care, and good faith obligations to the company and its shareholders. Listed companies face additional requirements under Capital Market Authority regulations, including mandatory disclosure of director compensation, related party transactions, and potential conflicts of interest. The agreement must incorporate compliance with Saudi Arabia's Anti-Bribery Law, requiring directors to maintain ethical standards and report any corruption attempts. For companies with foreign ownership, the document should address any restrictions under Saudi Investment Law and ensure compliance with economic localization requirements. The agreement must also consider Saudi Labor Law provisions if the director has executive responsibilities, covering working hours, vacation entitlements, and end-of-service benefits. All agreements should include arbitration clauses specifying Saudi courts or recognized arbitration centers to resolve disputes, ensuring enforceability within the Kingdom's legal framework.