Associations and Decisions of ...

It is crucial to highlight limited liability companies before delving into the specifics of the general assembly of partners. We will first review the definition of this type of company, then look at the prominent characteristics that distinguish them, and finally discuss how to establish the general assembly and the main controls for its convening and the important decisions made by the partners.

Definition of a Limited Liability Company

Under Article 156 of the new Saudi Companies Law, which was implemented at the beginning of this year 2023, a limited liability company is defined as a company that can be established by one or more natural or legal persons, where its financial liability is independent of the financial liability of each partner or owner within it. This company alone bears the debts and obligations resulting from its activities, while the owners or partners are not held responsible for these debts and obligations except to the extent of their shares in the capital.

Characteristics Distinguishing a Limited Liability Company

One or more partners or other individuals are appointed to manage the company, either through the founding contract or a separate contract, for a specified or unspecified period. Partners also have the right to form a board of directors if there are several partners. The founding contract or partners' decisions determine how the company is managed and the majority required to make decisions when appointing multiple managers or forming a board of directors. The appointed manager represents the company before judicial and arbitration bodies and others, and has the right to delegate others to perform specific tasks, provided these appointments and changes are recorded in the commercial register to become effective.

Procedures for Convening the General Assembly

The general assembly consists of all partners and is convened by the directors according to the conditions specified in the founding contract, at least once every year during the six months following the end of the financial year. The assembly can be convened at any time upon the request of the directors, auditors, or one or more partners representing at least 10% of the capital. Invitations must be sent at least 21 days before the scheduled meeting date, and the assembly can be held without adherence to the prescribed conditions if the attendees represent all capital shares.

Decision-Making and Partners' Rights

Decisions within the general assembly are issued or through circulation without convening. The manager sends the proposed decisions to the partners for voting in writing, and decisions are not valid unless approved by partners representing more than half of the capital, unless the contract states otherwise. The assembly also discusses the manager's report, financial statements, and the auditor's report and decides on profit distribution if available.

Benefits of the General Assembly

The benefits of general assembly meetings include enhancing communication between partners and management, preserving partners' rights, and activating their role according to the company's system and founding contract, in addition to promoting governance and working within a regulatory framework that ensures continued insight into the company's proceedings.

The general assembly also works to affirm and guarantee direct and effective interaction between partners and management, enabling effective monitoring and periodic evaluation of the company's performance and future strategies. Through these meetings, full transparency in operational and financial processes is guaranteed, enhancing trust among all involved parties.

Effective Participation of Partners

Every partner has the right to attend the general assembly, participate in deliberations, and vote on decisions. This gives each partner the opportunity to influence the company's direction and policies. Partners can also include specific topics on the agenda, allowing for the discussion of issues that interest them or enhance the company's efficiency.

Proxy and Alternate Attendance

Partners can also delegate another partner or a non-partner to attend meetings and vote on their behalf if the founding contract allows it. This flexibility in attendance ensures broad and effective representation of all partners, even those who may find it difficult to attend in person.

Use of Technology

By using modern technology, the company can conduct its general assemblies virtually, allowing partners to participate from anywhere in the world. This approach facilitates communication and increases partners' participation in making important decisions easily and conveniently, enhancing democracy in the company's management and reducing geographical barriers that might prevent actual attendance.

Documentation of Decisions and Deliberations

All decisions and deliberations that occur during the general assemblies are accurately documented in special records prepared for this purpose. This procedure ensures transparency and provides a detailed record that can be referred to understand the history of the decisions taken and their reasons, as well as to help resolve any disputes that may arise in the future regarding the interpretation or implementation of these decisions.

The Right to Oversight and Insight

Partners have the right to play a supervisory role on the company's management, especially in the absence of a supervisory board, where a non-director partner can perform this role. Partners are also granted the right to access all company documents and operations and inspect its records twice every financial year, enhancing transparency and trust between partners and management.

General Benefits of the General Assembly

In addition to enhancing governance and ensuring transparency, general assembly meetings keep partners continuously informed about the business's progress and the company's developments. These meetings provide a platform for ongoing communication and idea exchange, helping to achieve strategic alignment and enhancing the company's ability to adapt to challenges and seize opportunities.

In this way, the general assemblies of limited liability companies are not only a legal requirement that must be complied with, but also a vital tool for managing the company in an effective and transparent manner, ensuring all partners' participation in making key decisions that affect the company's future.