Manipulation of company funds

It is well known that once a company is incorporated, it acquires legal personality.
As a result, it has a financial liability that is independent of the liabilities of its partners.
This financial liability consists of the shares provided by the partners, whether in cash or in kind, in addition to the reserve funds that the company builds up during its activity and the profits it realizes from the operations it carries out within the framework of the offer for which it was established.
Intangible assets such as patents and the like are also included.

Accordingly, all components of the company’s financial assets, as a legal entity, should be subject to the same legal protection as the natural person represented by a human being.
Thus, an attack on any element of the company’s financial assets falls within the scope of unlawful acts that affect these assets intended to be protected.

After this introduction, the question I would like to ask is this.
Is the criminalization of the misuse of the company’s funds and credit provided for in the Saudi Companies Law?
The answer to this is that the old Saudi Companies Law (expired in 1437 AH) did not explicitly stipulate the criminalization of the misuse of the company’s funds and credit.
Instead, those acts that constitute misuse of company funds were left to be categorized under other crimes such as breach of trust, embezzlement, or other crimes.

This was the subject of a criticism that I had previously sent to the Ministry of Commerce, citing that the French Companies Law issued in 1965 – which was simultaneous with the issuance of the old Saudi Companies Law – explicitly stipulated the criminalization of the misuse of company funds and credit in Article (3/437) thereof, which reads: “Any president or director of a company who uses in bad faith the funds and credit of the company for purposes contrary to the interests of the company to achieve personal objectives or to favor another company in which he has direct or indirect personal interests shall be punished by imprisonment of not less than one year and not more than five years and a fine of not less than 1,000 francs and not more than 10,000 francs or one of the two penalties.
and not more than five years, and a fine of not less than one thousand francs and not more than ten thousand francs, or one of these two penalties. This criminal provision is of great importance for prevention and protection due to the inclusion of countless forms of acts under it that adversely affect the funds and credit of the company, such as renting some of the company’s properties at a lower price for the sake of a personal relationship.
Using some of the company’s funds or assets as a pledge to guarantee the personal debt of the company’s directors or board members.
The French legislator’s approach to this criminalization was based on the inapplicability of the general rules of criminalizing breach of trust to many acts that harm the company’s funds, whether in acts of management, such as signing networks or bills of exchange that cost the company large sums without the intention of appropriating them, but as a courtesy to another company, as well as the authority of the director to pay bonuses to those with whom he is related by ties of kinship or friendship.
Therefore, the importance of the existence of this text – which relates to the most important thing in companies, which is their money and credit – emerged in that it prevents managers and board members who may not apply to their actions – which fall under misuse – from escaping. I personally, through my work as a lawyer, have experienced such behaviors, and I will give one example, which is that several years ago I obtained a court judgment for my client, one of the listed joint stock companies in the capital market, against another company with a closed shareholding, then I was surprised by the order of the general manager of the financial department based on the recommendation of the chairman of the board of directors to include this debt among the bad debts and not to continue to implement the court judgment, and then I learned that the reason for this was a special understanding between the two heads of the board of directors of the company.
Accordingly, the shareholders’ funds were unjustly disposed of.

However, thankfully, the new Companies Law was issued in 1437 AH, which included the punishment for compromising the company’s funds and attachments, as Article (212 / b) stipulates the following without prejudice to any harsher penalty stipulated by another law.
A term of imprisonment of not more than five years and a fine of not more than five million riyals, or one of these two penalties Any director, officer or board member who uses the company’s funds in a manner that he knows is against the interests of the company to achieve personal purposes or favoritism to a company or person or to benefit from a project or transaction in which he has a direct or indirect interest.

In fact.
This explicit and direct criminalization provision decided by the Saudi regulator is of great importance as it completes the system of due protection of the funds and credit of these companies from acts that may be committed by directors or members of the board of directors for their personal interests or interests other than the interest of the company.

I will conclude by giving some real and real examples of these acts so that the honorable reader is aware of the outcomes of this criminal text, which we hope to activate its application on the ground without being an ink on paper.
This is like those lengthy and luxurious assignments for some board members and senior executives in order to achieve some of the company’s business, which does not deserve a tenth of those financially recorded costs.
Or like how they benefit from companies that have interests in their company and provide them with benefits and gifts.
For example, a certain bank gives their individual persons interest-free banking facilities to put the company’s money in the account of this bank, and this is considered a personal benefit for them and not for the company.
This is analogous to many of the things that are too long to list here, such as luxury cars and their maintenance costs.
The periodic meetings of board members, in which the value of the lunch meal for them amounts to tens of thousands of riyals, in addition to the hotel suite with all its expenses for travelers, which may extend its reservation for several days, accompanied by the family and so on.
Exorbitant travel costs for courses or business visits that are not urgently needed, so they are used for tourism and entertainment and are placed under administrative expenses.
As well as offering less qualified suppliers over others for personal interests and other wrong actions and behaviors that require caution, caution, seriousness and firmness in punishing the perpetrators and a quarter of the perpetrators.