ADVOCATING FOR REFORM OF THE SAUDI LAW OF DIRECTORS' LIABILITIES: TOWARDS ENFORCEMENT FOR FUNDS MANAGEMENT THROUGH DERIVATIVE ACTIONS

This study critically examines the inadequacies in Saudi company law concerning directors’ liabilities and the application of derivative actions, emphasizing the urgent need for legal reforms to strengthen corporate governance and ensure accountability. Adopting a systematic analytical approach as part of qualitative research, the study comprehensively reviews existing literature and evaluates the interplay between Shariah law, the Saudi Companies Law, and corporate governance regulations that shape directors’ responsibilities. The findings reveal that despite recent reforms, weak enforcement mechanisms continue to impede shareholders particularly minority investors—from holding directors accountable for mismanagement or breaches of fiduciary duties. The research advocates for legislative amendments that streamline derivative proceedings, including the introduction of structured litigation fees and clear procedural guidelines to incentivize shareholder participation. It further recommends the adaptation of elements from the UK model to align Saudi law with international best practices, thereby enhancing transparency, investor confidence, and corporate responsibility. Overall, the proposed reforms are vital for improving fund management, protecting shareholder interests, and reinforcing ethical and sustainable corporate governance within the evolving Saudi business environment.