Prompt Pack Corporate Governance Policy

Corporate Governance Policy

A Corporate Governance Policy formalises the structures and processes by which a company is directed and controlled. For listed companies it is a regulatory requirement; for private companies it is increasingly expected by investors, lenders, and regulators — and is the foundation of any credible compliance program.

When to use this

• A company is preparing for a listing on a regulated exchange (DFM, ADX, Tadawul, LSE, NYSE, Nasdaq) where governance disclosure is mandatory.
• A private company is raising capital and investors require documented governance structures as a condition of investment.
• A company is expanding its board from a founder-controlled structure to include independent directors.
• Regulatory guidance (e.g., UAE Governance Code for public companies, SCA Governance Rules) requires a written governance policy.
• Following a corporate incident or audit finding that exposed governance gaps.
• A group of companies needs a uniform governance framework across multiple jurisdictions.

Required inputs

Optional inputs

• Whether the policy covers subsidiaries and group companies.
• Whether Sharia compliance considerations apply to the board's oversight role (relevant for Islamic finance companies in KSA, UAE, and Bahrain).
• Whether a Nomination and Remuneration Committee already exists or needs to be established.
• Whether the company has a Sharia Supervisory Board in addition to the main board.

Document structure

1. Introduction and purpose

• The company's commitment to high standards of corporate governance.
• The purpose of the policy: to ensure the board operates effectively, consistently, and in compliance with applicable law.
• The governing law and governance code(s) to which the policy relates.
• Date of adoption and review cycle (recommend: annual review).

2. Board structure and composition

2.1 Board size:

• Define the minimum and maximum number of directors.
• Listed company requirements: UAE (SCA requires minimum 5 directors for listed companies); KSA (CMA requires minimum 5 for listed companies); DIFC/ADGM (companies law governs minimum).

2.2 Director categories:

• Executive directors (management role).
• Non-executive directors (oversight role).
• Independent non-executive directors: define independence using the applicable code standard.

2.3 Independence criteria: A director is independent if they:

• Have not been an employee of the company in the past [5] years.
• Do not have a material business relationship with the company.
• Do not represent a significant shareholder.
• Do not have a family relationship with any executive director or senior manager.
• Have not served on the board for more than [9] years without re-evaluation of independence.

UAE SCA Governance Rules for listed companies: require at least one-third of board members to be independent non-executives. KSA CMA: at least two independent members or one-third, whichever is greater.

2.4 Family business governance (MENA specific): In family businesses — which constitute the majority of MENA private companies — the board composition provisions should address: family vs. non-family directors, the role of a family governance council if any, separation of ownership and management roles, and succession planning across generations.

3. Director qualifications and fitness

• Minimum qualifications: relevant experience, financial literacy (at least one member with financial expertise), clean criminal record.
• Continuous professional development requirements.
• Disclosure obligations: directors must disclose any conflict of interest, change in outside directorships, or material change in personal circumstances.
• Fit and proper requirements for directors of regulated entities (DFSA, FSR, SAMA, UAE Insurance Authority).

4. Board meetings and decision-making

4.1 Meeting frequency:

• Minimum number of meetings per year (listed companies in UAE: at least 4 per year under SCA rules; KSA CMA: at least 4 per year).
• Quorum requirements.

4.2 Agenda and information:

• Board papers to be circulated [X] days before each meeting.
• Standard agenda: financials, operational performance, risk report, governance matters, strategic review (at least annually).

4.3 Reserved matters: List decisions reserved for the board (not delegated to management). Minimum list for a commercial company:

• Approval of annual budget and business plan.
• Major capital expenditure above [threshold].
• Acquisitions, disposals, and investments above [threshold].
• Appointment and removal of CEO/CFO.
• Board and committee appointments.
• Material litigation.
• Related party transactions (especially important in MENA family business contexts).
• Approval of annual financial statements.
• Dividend approval.

5. Board committees

Describe each committee established:

Audit Committee:

• Composition (minimum [3] members; majority independent; at least one financial expert).
• Responsibilities: oversight of financial reporting, internal controls, external and internal audit, risk management.
• Mandatory for: UAE listed companies (SCA requirement); KSA listed companies (CMA requirement); DIFC/ADGM regulated entities.

Nomination and Remuneration Committee:

• Responsibilities: director nomination, independence assessment, succession planning, executive remuneration policy.
• KSA: CMA requires a Nomination and Remuneration Committee for listed companies.

Risk Committee (for regulated entities and large companies):

• Oversight of enterprise risk management framework.
• Reporting line to the full board.

Sharia Supervisory Board (for Islamic finance entities):

• Composition: minimum [3] scholars with relevant qualifications.
• Role: review and certify Sharia compliance of products and operations.
• Reporting: annual Sharia report to shareholders.
• Required for: UAE Islamic banks, KSA Islamic finance institutions, Bahrain financial institutions under CBB rules.

6. Board evaluation

• Annual performance evaluation of the board as a whole, individual directors, and each committee.
• Methodology: self-assessment questionnaire, peer review, or external facilitator (recommended for listed companies at least every 3 years).
• Results: discussed at a board meeting; action plan prepared for any identified gaps.

7. Succession planning

• Identification of potential successors for the CEO, CFO, and other key management roles.
• Emergency succession plan (immediate step-up if key person is incapacitated).
• Director succession: proactive identification of candidates for board vacancies; avoid cliff-edge where many independent directors retire simultaneously.
• MENA family businesses: plan must address generational succession and the role of non-family management.

8. Shareholder engagement

• Annual General Meeting (AGM): timing, notice requirements, and agenda.
• Minority shareholder rights: information rights, voting rights, related-party transaction approvals.
• Dividend policy: criteria and declaration process.
• Investor relations for listed companies: disclosure obligations, quiet period policy, insider trading policy.
• UAE: Federal Companies Law requirements for AGM timing and shareholder notice.
• KSA: Companies Law (Royal Decree M/3, 2015 as amended) governs AGM requirements.

9. Related party transactions

One of the most important governance provisions in MENA:

• Define related parties (directors, major shareholders, their family members and associated entities).
• Require board approval for any transaction with a related party above a specified threshold.
• Require independent director approval for transactions where a director has a personal interest.
• Listed companies must disclose related party transactions in their annual reports (SCA and CMA rules).
• Maintain a register of interests.

10. Reporting and transparency

• Annual report governance section: mandatory disclosures for listed companies.
• ESG / sustainability reporting: increasingly required by DFM, ADX, Tadawul, and institutional investors.
• Whistleblowing: reference to the company's Code of Conduct or speak-up policy.

11. Review and amendment

• The policy is reviewed annually by the board (or a designated committee).
• Amendments require board approval.
• Local counsel in each operating jurisdiction reviews the policy before adoption and after any material regulatory change.

Jurisdictional governance codes

Common mistakes

• A policy that lists governance obligations without assigning them to specific bodies (board, committee, management) — unassigned obligations are ignored.
• Independence criteria that are less stringent than the applicable regulatory code — this creates a compliance gap for listed companies.
• No reserved matters list — without it, management takes decisions that should require board approval.
• Related party transaction controls that are aspirational but have no enforcement mechanism (no approval gate, no register).
• Failing to update the policy after listing rules change — governance codes are revised periodically; the policy must track them.

Related skills

• [[prompt-pack-code-of-conduct]]
• [[prompt-pack-delegation-of-authority-matrix]]
• [[prompt-pack-director-indemnification-agreement]]
• [[prompt-pack-corporate-resolutions]]
• [[prompt-pack-anti-bribery-policy]]