Independent Director Agreement Template for Saudi Arabia
Generate a bespoke document
What is a Independent Director Agreement?
The Independent Director Agreement is a crucial document used when appointing independent members to a company's board of directors in Saudi Arabia. It is particularly relevant for joint stock companies, especially those listed on the Saudi Stock Exchange (Tadawul), where independent directors are mandatory under Capital Market Authority regulations. The agreement must comply with the Saudi Companies Law, Corporate Governance Regulations, and relevant CMA directives, while also adhering to Shariah principles. This document typically includes detailed provisions on independence criteria, duties, remuneration, and compliance requirements, reflecting both international best practices and local regulatory requirements. It serves as a key governance tool in implementing Saudi Arabia's Vision 2030 corporate governance objectives.
About the Independent Director Agreement
When appointing independent directors to your company's board in Saudi Arabia, you need a comprehensive Independent Director Agreement that meets both local regulatory requirements and international governance standards. This legal document formalizes the appointment while ensuring compliance with Saudi Companies Law, Capital Market Authority regulations, and Shariah principles.
When do you need this document?
You require an Independent Director Agreement when your joint stock company appoints independent board members, particularly if you're listed on the Saudi Stock Exchange (Tadawul). Listed companies must maintain at least one-third independent directors according to CMA Corporate Governance Regulations. You'll also need this agreement when restructuring your board composition, replacing existing independent directors, or when preparing for an initial public offering that requires enhanced governance structures.
Key legal considerations
Your agreement must clearly define independence criteria as specified in CMA regulations, including restrictions on financial relationships, employment history, and family connections with the company. Include detailed provisions on director duties, including fiduciary responsibilities, attendance requirements, and confidentiality obligations. Address remuneration structures, whether fixed fees, meeting attendance payments, or performance-based compensation, ensuring alignment with Shariah principles. The document should specify liability limitations, indemnification provisions, and insurance coverage. Include termination clauses covering resignation, removal for cause, and end-of-term procedures. Establish clear reporting relationships with the board secretary and regulatory disclosure requirements.
Legal requirements in Saudi Arabia
Under the Companies Law (Royal Decree No. M/3 of 2015), independent directors must meet specific qualifications including professional experience, educational background, and absence of conflicts of interest. The Corporate Governance Regulations 2017 mandate that independent directors cannot have held executive positions in the company within the previous two years, own more than 5% of shares, or have significant business relationships with the company. Your agreement must incorporate Anti-Corruption Law provisions regarding ethical conduct and conflict of interest management. For listed companies, comply with Capital Market Law disclosure requirements, including director biography submissions to CMA and ongoing related party transaction reporting. Ensure the agreement allows for CMA inspection rights and regulatory cooperation. The document must be executed in Arabic or include certified Arabic translation for regulatory filing purposes, and all terms must comply with Shariah principles as confirmed by your company's Shariah board if applicable.
GOVERNING LAW
Applicable law
This Independent Director Agreement is drafted to comply with Saudi Arabia law. Key legislation includes:
Corporate Governance Regulations 2017 (amended 2021): Issued by Capital Market Authority (CMA), details requirements for independent directors, including independence criteria, roles, and responsibilities
Capital Market Law (Royal Decree No. M/30): Relevant for listed companies, contains provisions affecting director duties and disclosure requirements
Anti-Corruption Law (Royal Decree No. M/36): Contains provisions regarding conflicts of interest and ethical conduct that directors must adhere to
Labor Law (Royal Decree No. M/51): While independent directors aren't typically employees, certain provisions may be relevant for compensation and service terms
Competition Law (Royal Decree No. M/75): Relevant for non-compete provisions and market competition considerations in director agreements
Saudi Vision 2030 Governance Framework: National strategic framework affecting corporate governance practices and director responsibilities
Explore 208,390+ legal templates
Explore 208,390+ legal templates
Genie's Security Promise
Genie is the safest place to draft. Here's how we prioritise your privacy and security.
Your data is private:
We do not train on your data; Genie's AI improves independently
All data stored on Genie is private to your organisation
Your documents are protected:
Your documents are protected by ultra-secure 256-bit encryption
We are ISO27001 certified, so your data is secure
Organizational security:
You retain IP ownership of your documents and their information
You have full control over your data and who gets to see it