Sipchem Corporate Governance

Transcription

1 Sipchem Corporate Governance The corporate governance system was approved by the Normal General Assembly on 04/04/2009 1

2 Contents Page Chapter one 3 Preliminary Provisions Introduction Definitions... 3 Chapter Two 5 Rights of Shareholders and General Assembly Shareholders General Rights Shareholders General Assembly Voting Rights Shareholders Rights in the Shares Profits Chapter Three 8 Disclosure and Transparency Disclosure Policies and Procedures Disclosure in the Board of Directors Report Chapter Four 10 Board of Directors Main Functions of the Board Board's Responsibilities Formation of the Board Membership Policy of the Board of Directors Membership Criteria of the Board of Directors Procedures of Board of Directors Nomination Committees of the Board Audit Committee Nominations and Remuneration Committee Board of Directors Meetings and Agenda Board of directors Remuneration and Compensation Conflict of Interests within Board Chapter Five 23 Dividends Distribution Policy Accouchement of Dividends Distribution Sources and size of Dividends Distribution Distribution of declared dividends

3 Chapter one Preliminary Provisions Introduction: Saudi International Petrochemical Company (Sipchem) prepared its corporate governance regulations in accordance with the requirements of the Companies Corporate Governance Regulations Article (10), paragraph C, issued by the Capital Market Authority (CMA), and in accordance with the Companies Act, listing rules, and the company s bylaws without conflict with its provisions. Governance is a set of structures, systems, regulations and processes which are issued in order to ideally manage and monitor the company. It includes explanation of the relationships amongst the company s shareholders, the board of directors and the executive management so as to protect the shareholders rights on the long term. The application of the corporate governance system is so crucial to enhance the company s position and its business credibility locally and internationally. Article (1) Definitions: The words and phrases mentioned in this system shall have the explained meanings as stated in the terms list used in the CMA s rules and regulations. Sipchem: Saudi International Petrochemical Company Non-executive member: A member who does not enjoy full-time existence to manage the Company, or does not receive monthly or annually salary. Independent member: A Board member who enjoys full independence; such independence shall be void in case of occurrence of the following: - To own 5% or more of the shares of "Sipchem" or its affiliates. - To be representative of a legal person who owns 5% or more of the shares of "Sipchem" or its affiliates. - To be of senior executives during the past two years in Sipchem or any of its affiliates. - To be a first degree relative of a Board Member in the Company or its affiliates. 3

4 - To be a first degree relative of any top executive in the Company or its affiliates. - To be a member of the board of directors of any affiliate company. - To be employed during the past two years at any of the parties associated with the Company or any of its affiliates, such as chartered accountants and major suppliers, or to own a controlling interest in any one of those parties during the past two years. First degree relatives: Father, mother, husband, wife, an children. Stakeholders: Any person who has an interest with the company, such as shareholders, employees, creditors, suppliers and community. Cumulative voting: A method of voting to select the board members that gives each shareholder a voting capacity according to the number of shares he owns, where he can vote for one nominee or divide it amongst selected nominees without repetition of these votes. This method increases the minority shareholders opportunities to get representation in the board of directors through the cumulative voting for one nominee. Minority shareholders: Shareholders who represent a non-dominant group of the company who cannot have tangible influence. Remuneration & Compensation: Salaries, wages, allowances, profits and their equal, in addition to the periodic or annual bonus linked with performance and short or long-term incentive plans and any other privileges. 4

5 Chapter Two Shareholders and General Assembly Rights Article (2) - The General Rights of Shareholders: Shareholders shall have all rights related to a share, particularly the right to obtain a share of the profits to be distributed, own a share of the company's assets upon liquidation, attend the shareholders assemblies, dispose of shares, monitor all board proceedings, file liability claims against the members of the board, and the right of inquiry and information request without prejudice to the company s interests in accordance with the Capital Market Law and its executive regulations. The company s statutes and bylaws should include the necessary procedures and precautions to ensure the shareholders exercise their statutory rights. All information that would enable shareholders to exercise their rights to the fullest should be availed by the company. Such information should be sufficient and accurate and should be presented and updated systematically and timely. The Company has to use the most effective ways to communicate with shareholders. Shareholders should be treated equally regarding the provision of information. Article (3) - The Shareholders General Assembly: A) The General Assembly shall be convened at least once a year during the six months following the end of the fiscal year for the Company. B) The General assembly shall be convened upon the invitation of the Board, or if requested by the Auditor or a number of shareholders who at least own (5%) of the capital. C) Any shareholder who owns (20) shares shall have the right to vote, call, participate and vote during the meeting. D) The date, location and agenda of the General Assembly must be declared at least 25 days before the meeting or according to the period specified by the governing laws and regulations, and such information should be published in CMA and the Company's websites and in the Official Gazette, as well as on a daily newspaper that is widely circulated in the city of the company s head office. A copy of the invitation along with the meeting s agenda should be sent to the Companies General Department of the Ministry of Commerce. 5

6 E) The shareholders must be granted the opportunity to participate effectively and vote in the meetings of the General Assembly. They must be informed of the rules that govern such meetings and the voting procedures. F) Efforts should be exerted to facilitate the participation of the majority of shareholders in the meeting of General Assembly; e.g. selection of appropriate time and place. G) The Board of Directors must take into account, when preparing the agenda of the General Assembly Meeting, the issues that shareholders wish to be included in the agenda of the meeting. Shareholders, who own at least (5%) of the shares of the Company, may add one or more subjects to the agenda of the General Assembly during its preparation. H) Shareholders have the right to discuss the agenda items of the General Assembly and require explanations about the same from the members of the Board of Directors and Auditors. The Board of Directors must answer the questions of the Shareholders to the extent that does not expose the Company's interest to risk. I) The topics presented in the General Assembly s meetings should be supported by sufficient information to enable the Shareholders to make their decisions. J) Shareholders should be enabled to see the minutes of the meeting of the General Assembly, and the Company must provide CMA with a copy of the meeting minutes within 10 (ten) days from meeting date. K) CMA shall be timely informed of the outcomes of the General Assembly Meeting. Article (4) - Voting Rights: A)Voting is considered a fundamental right for Shareholders and it cannot be eliminated in any way, and the company shall avoid any action which may impede the use of voting right, and shall facilitate the exercise of such right. B) A Shareholder shall have the right to appoint, in writing, another non-board member or nonstaff of the Company to attend the meeting of the General Assembly and vote on behalf of him. C) The method of cumulative voting, when approved by the concerned entities, should be adopted when voting to select members of the Board in the General Assembly. D) The Company urges investors of legal personalities who are authorized to act on behalf of others, such as investment funds, to declare their voting policy and their actual voting in 6

7 their annual reports. They are also required to declare the way they deal with any essential conflict of interest that may influence their basic rights related to their investments. E) The voting results should be presented to the Shareholders at the end of the General Assembly Meeting. Article (5): Rights of Shareholders in Dividends The Board of directors shall establish a clear policy for the distribution of dividends, as set out in Chapter Five, to maintain interests of the Shareholders and the Company. The Board shall inform the Shareholders of this policy at the meeting of the General Assembly, and refer to in the report of the Board. The General Assembly approves the proposed dividend and date of distribution. The priority of profits, cash or bonus shares, shall be for registered Shareholders within the records of the SDC upon closing the trading at the day of the General assembly Meeting. 7

8 Chapter Three Disclosure and Transparency Transparency and accuracy of information disclosure in a timely manner are considered basic principles of corporate governance. Accordingly, Sipchem has developed its own information disclosure and transparency policy in line with the requirements of CMA and the Companies Act. Article (6) - Policies and Procedures of Disclosure: A) The Company shall inform CMA and the public, without delay, of any significant developments that fall in with the framework of its activities and such information shall not be available for the laymen as stated in the Registration and Listing Rules. B) The Company shall prepare all the financial statements and related explanations in accordance with the Saudi accounting standards. These statements should be disclosed, as follows, according to the Registration and Listing Rules to enable the Shareholders to evaluate the Company s performance: 1. The Company shall provide CMA with the initial financial statements immediately after being approved and declare them to the Shareholders within a period not exceeding fifteen business days from the end of the financial period covered by such financial statements. 2. The Company shall provide CMA with the annual financial statements and the Board of Directors report immediately after being approved and declare them to the Shareholders within a period not exceeding forty business days from the end of the financial period covered by such financial statements. 3. The Company shall announce via website the initial annual financial statements and the Board of Directors report after being disclosed to CMA and its Shareholders. Article (7): Disclosure in the Board of Directors Report The Company shall disclose all the important information and publish the complete Board of Directors report which is prepared in line with CMA requirements as stated in the Registration and Listing Rules. The following items shall be attached to the annual financial statements of the company: A) Any of CMA s corporate governance regulations that were not applied and the reasons for that. 8

9 B) Names of the joint stock companies in which the Company s Board Member is also a member in their boards. C) The formation and classification of the Board of Directors as follows: Executive Board Member, Non-Executive Board Members or Independent Board Member. D) A brief description of the functions of the main board committees such as the Audit Committee and the Nominations and Remunerations Committee. The names of these committees, their chairmen, members and the number of their meetings should be mentioned. E) Details of remunerations and compensations paid to the members of the Board of Directors and also to five of the top executives who received the highest remunerations and compensations from the Company, in addition to the CEO and the Financial Manager if they are not included provided that each of them to be mentioned individually. F) Any penalty or sanction or temporary limitation imposed on the Company by CMA or any other supervisory, Statutory or judicial authority. 9

10 Chapter Four Board of Directors The Company believes that the existence of an attentive specialized independent board of directors is the basis of any good system of corporate governance. The board of directors has a remarkable influence on the Company s performance through its supervision, guidance and monitoring of the executive management in light of the good and benefit of the Shareholders. The executive managers of the Company play an important role in the implementation of the corporate governance. Mutual effective cooperation amongst all parties and decisive separation between authorities are considered the most important elements of the corporate governance success. Article (8) - Basic Functions of the Board of Directors: Members of the Board of Directors shall perform their functions in a sincere and careful manner so as to achieve the Company s objectives and meet all the shareholders expectations and to refrain from the pursuit of benefit for specific group. The main functions of the Board shall be as follows: A) Adoption of the strategic directions and key objectives of the Company and overseeing its implementation, including: 1. Development a comprehensive strategy and key action plans of the Company, and defining a risk management policy to be subject to regular review. 2. Determination of the optimal capital structure of the Company s strategies and financial objectives and approving the annual budgets. 3. Overseeing the major capital expenditures of the Company, ownership of assets and disposition thereof. 4. Development of performance objectives, monitoring implementation and overall performance in the Company. 5. Periodic review and adoption of the organizational and employment structures in the Company. B) Development and overseeing of internal audit regulations, for example: 10

11 1. To develop a written policy to organize conflicts of interests and handle the potential conflict cases for each of the Board Members, Executive Management and Shareholders, including the misuse of corporate assets and facilities and abuse resulting from transactions with relatives. 2. To ensure the integrity of financial and accounting systems, including regulations relating to the preparation of financial reports. 3. To ensure the application of control systems suitable for risk management through the identification of public perception about the risks they may face the Company in order to be discussed transparently. 4. To provide annual review of the effectiveness of internal control procedures within the Company. C) To develop a written policy to govern the relationship with the stakeholders to protect them and maintain their rights, and this policy should cover, in particular, the following: 1. Methods of compensation of stakeholders in case of violation of their rights subscribed in the regulations and protected by contracts. 2. Methods of settlement of complaints and disputes that may arise between the Company and the Stakeholders. 3. Appropriate methods to establish good relations with the clients, suppliers and maintaining the confidentiality of relative information. 4. Code of Conduct to organize the relationship between the Company s managers and employees, and the Stakeholders in line with the sound professional and ethical standard. The Board of Directors should develop the necessary method to monitor the application of these rules and adherence to them. 5. Development of policies and procedures which assure the Company s adherence to the rules and regulations and its commitment to disclose any substantial information that may be of interest for Shareholders, creditors and other Stakeholders. Article (9) - The Board of Directors Responsibilities: A) Subject to the terms of reference of the General Assembly, the Board of Directors assumes all powers and authorities necessary to manage the company. The ultimate responsibility for the Company remains to the Board despite of forming committees or authorizing entities or other individuals to perform its duties, and the Board have to avoid granting of general or indefinite duration authorizations. 11

12 B) The Company shall specify clearly the responsibilities of the Board of Directors in the Company's bylaws. The Board of Directors shall assume its duties with decisive responsibility and in good faith and seriousness. The Board decisions shall be based on clear and accurate information from the Executive Management, or any other reliable source. C) A Board Member shall represent all Shareholders, and should work for the benefit of the Company in general, not for the interests of the group which he represents or which voted for his appointment in the Board of Directors. D) The Board shall determine all powers delegated to Executive Management, decisionmaking procedures, and the duration of such delegation. It shall also identify the issues over which it has the power to decide. And the Executive Management must provide periodic reports on how it exercises the delegated powers. E) The Company has specific procedures to help the new Board Members know the Company s business, especially financial and legal matters besides the possibility of giving them an appropriate training if necessary. F) The Company provides adequate information about its business affairs to all the Board Members in general and to the non-executive board members in particular so as to enable them perform their duties carefully. G) The Board of Directors is not authorized to make any loans agreements with terms exceeding three years, sell or mortgage the Company s real estate, or release the Company s debtors from their commitments unless allowed by the Company s bylaws. If the Company s bylaws do not include provisions covering this matter, the Board of Directors is not authorized to execute the previously mentioned actions without permission from the General Assembly as long as such actions are part of the Company s purpose of business. Article (10) - Formation of the Board of Directors: A) The Board of Directors shall be formed based on the appropriate representation of all the Shareholders. It shall work according to its supervisory duties, develop and follow up the Company s management and strategies. The board of directors shall be formed from a suitable number of board members, namely 11, which had been specified in the Company s Statute, in addition to the policies and criteria of the membership. One of the most important criteria which should be taken into account is the necessity of the presence of competencies and different skills in the Board of Directors. 12

13 B) The minimum quorum for the validity of any Board meeting is six members. In case a Board member authorizes another member to attend the Board meeting, such authorization should be according following: 1. The Board Member shall not authorize more than one member to represent him in the same meeting. 2. The authorization should be in writing. 3. The authorized member shall not vote for any resolution which the authorizing member is prohibited to vote for by virtue of the Statute. C) The Boards of Directors resolutions are determined according to the majority of attending members. When votes are equal, the side in which the chairman vote is shall prevail. The Board s discussions shall be recorded in the meetings minutes which should be signed by the Chairman and the Secretary. These minutes should be recorded in a special register and to be signed by the Chairman and the Secretary. The Board shall not make resolutions by circulation unless there is necessity provided that all the Board Members approve these resolutions in writing and to be presented in the following Board meeting. Article (11) - The Board of Directors Membership Policies: A) The company shall be managed by a Board of Directors consisting of 11 members. B) The General Assembly shall appoint the Board members for a period not exceeding three years and membership can be renewed for another term. C) The majority of the Board members are non-executive. D) The independent Board members should not be less than two, or one third of the Board members, whosever more. E) It is not possible to occupy the position of the Chairman and any other executive position in the Company, such as the managing director, executive president or general manager. F) The Board members shall not enjoy membership of more than five joint stock companies at the same time. G) The General Assembly may at any time terminate the membership of all or some of the Board members. H) In case there is a vacant membership in the Board of Directors, the Board shall have the right to appoint a temporary member and such appointment has to be presented to the first 13

14 coming Ordinary General Assembly Meeting and the new member shall complete the term of his ancestor. I) If the number of the Board members is less than the required quorum for the meetings, the Ordinary General Assembly shall be convened as soon as possible to appoint the necessary number of members. J) At the end of any Board Member s term for any reason, the company shall notify the CMA immediately explaining the reasons. K) The Corporate Shareholder shall not have the right to select the other Board members. Article (12) The Board membership criteria A) The Board Member should own a number of the Company s shares with nominal value not less than SAR 10,000. These shares should be deposited within 30 days from the date of appointment of the Board Member in one of the banks designated by the Minster Of Commerce. The shares shall be used as a guarantee for the board members responsibilities and they will be non-negotiable until the end of the period specified to review the liability claim stated in article (77) of the Companies Act or until reaching a final decision regarding the said claim. B) In case the Board Member fails to present the guarantee shares in the specified deadline, his membership shall be void. Article (13) - Procedures of Board of Directors Membership Nomination: A) The Board nominee may present his nomination documents by: 1. The registered mail to the Company s head office address to be forwarded to the Board Secretary. B) The documents required for the nomination for Board membership include the following: 1. The full name and date of birth of the nominee. 2. The resume and educational certificates of the nominee. 3. The work experience of the nominee, including the positions he occupied during the last five years. 4. A statement of the number and dates of his previous board memberships. 14

15 5. A statement of the number and dates of his current board memberships in joint stock companies. 6. A statement of the number of companies or establishments in which he is involved in its management or ownership and which operate business activities similar to those of the Company. 7. The Nomination And Remuneration Committee shall review all the presented nominations and determine those who will be enlisted in the nominees list according to the approved criteria, taking into account not to nominate any person who was previously condemned in a crime related to honor or honesty. The Committee s recommendations shall be presented to the Board of Directors. 8. The cumulative voting approach shall be applied when voting for the selection of the Board Members in the General Assembly when approved by the concerned authorities. Article (14) - Board Committees: A) The Board shall form an appropriate number of committees so as to fulfill its tasks as required. Accordingly, the Board developed general procedures that include the functions and responsibilities of the Board Committees, their term and assigned authorities during this period and how the Board can have full control over these committees. Such committees shall inform the Board regarding their activities and decisions with absolute transparency. B) A sufficient number of none-executive Board Members shall be appointed within Committees concerned with tasks that may cause conflict of interests, such as ensuring the integrity of financial and non-financial reporting, reviewing relatives' transactions, cases of nomination for membership of the Board, appointment of executives, and determination of remunerations. The board shall periodically follow up the Committees activities to make sure that they are performing the assigned tasks. 15

16 Article (15) - The Audit Committee: A) The Board of Directors formed a committee of non-executive Board Members called The Audit Committee. The number of the committee members shall not be less than three; including one member specialized in financial and accounting affairs. The committee meeting must be attended by at least half of its members to meet the required quorum. B) The Shareholders General Assembly, based on the Board recommendations, developed the criteria of selecting the Audit Committee s members, their term of membership and the strategy of the Committee s performance. C) The Audit Committee s tasks and responsibilities include: 1. Supervising the internal audit department in the Company in order to ascertain the extent of its effectiveness in the implementation of actions and tasks identified by the Board of Directors. 2. Studying the internal control system and preparing a written report on its views and recommendations in this regard. 3. Considering the internal audit reports, and following up the implementation of corrective actions to the notes contained therein. 4. Making recommendations for the Board regarding the appointment and dismissal and defining the fees of chartered accountants, after ensuring their independence. 5. Following-up of chartered accountants and adoption of any action assigned to them during their work outside the scope of audit work. 6. Reviewing and commenting on the audit plan with the chartered accountant. 7. Considering the notes of the chartered accountant on the financial statements. 8. Reviewing the initial and annual financial statements before presented to the Board of Directors and give opinion and recommendation in respect thereof. 9. Studying the followed accounting policies and giving opinion and recommendation to the Board in the matter. Article (16) - The Nomination and Remuneration Committee: A) The Board of Directors formed a committee of its members called The Nomination and Remuneration Committee. The number of the committee members is not less than three and the committee meeting should be attended by at least half of its members to meet the required quorum. 16

17 B) The Shareholders General Assembly, based on the board of directors recommendation, developed the criteria of selecting the member of Nomination and Remuneration Committee, their term of membership and the strategy of the Committee s performance. C) The functions of the Nomination and Remuneration Committee include the following: 1. The recommendations of the Board's nominations shall be in accordance with policies and standards, taking into account not to nominate any person previously convicted of a crime involving moral turpitude and dishonesty. 2- Annual review of the needs of appropriate skills required for membership of the Board and the preparation of a description of the capabilities and qualifications required for membership of the Board, including the identification of time that assigned by a member for the tasks of the Board. 3- To review the structure of the Board and to make recommendations regarding changes that can be made. 4- To identify weaknesses and strengths of the Board, and propose solutions in accordance with the interests of the Company. 5- To ensure, on annual basis, the independence of the independent members and the absence of any conflict of interest if the member holds membership of the Board of another Company. 6- To draw up clear policies for the compensation and remuneration of the Board Members and Senior Executives, and to take into account when developing such policies using a criteria linked to performance. Article (17) - The Board of Directors Meetings and Agenda: A) The Board Members shall allocate adequate time to fulfill their responsibilities, including the preparation for the Board and the permanent and temporary committees meetings, and shall attend such meetings. B) The Board of Directors shall hold regular ordinary meetings upon a call by the Chairman who may also call for an emergency board meeting by a written request from two Board Members. C) The Chairman shall consult with the other Board Members and the CEO when preparing a specific agenda of the topics which will be presented to the Board. This agenda along with the necessary documents should be sent to the Board Members before the meeting with 17

18 time enough to have the opportunity to study the listed topics in order to be well prepareed before the meeting. The Board shall approve the agenda upon the opening of its meeting. In case of any objection to the agenda by any board member, the details of this objection shall be noted in the minutes of the meeting. D) The Board shall document its meetings and prepare the minutes that include all the discussions and arguments. In addition, the voting process which had taken place and these meetings should be archived and maintained for easy reference. Article (18) - Board Members Remuneration and Compensation: The Company s Statute explains the way of calculating and determining the Board Members remuneration and compensation. Such may be in the form of specific salary or attendance allowance or any in-kind privileges or percentage of the profits. A Board Member may obtain two or more of the mentioned privileges. Article (19) - Conflict of Interests in the Board of Directors: This policy has been developed under clause (B), Article X of The Corporate Governance Regulations issued pursuant to The Capital Market Authority's Resolution. Whereas the Company conducts its affairs according to the applied Regulations and Rules to the highest possible standards of transparency and loyalty, since its reputation depends on the performance of its Board members, managers and employees for their duties, and in order to have the ability to achieve the desired success, the Company's Board members, managers and employees have to work only for the company's interests. This policy outlines the basic criteria that have to be considered by the Company's Board members, managers and employees. They are required through this policy, in addition to the other related aspects, to take all the decisions that help them in carrying out their duties so as to achieve the company's interest and to avoid any influences aiming at serving the personal interests of the decision maker. The Company is keen on adhering to such rules in its business activities with the companies and corporations with regard to implementing its activities and providing its needs of suppliers or purchasers, especially those activities of personal interest for one of the Company's managers or employees. The harm that the Company may incur as a result of such activities are not confined only to its transactions with the supplier or service purchaser, but also it extends to all the transactions conducted between the company and other business corporations that is of personal benefit for a Board member or an employee rather than achieving the Company's interest. 18

19 Similarly, conflict of interests exists when a board member or an employee is personally involved in any business activity that is related whatsoever to any of his responsibilities towards the company. In such circumstance, the Board member or the employee must fully and clearly disclose any personal interests he or any related person may have. Definitions 1-The Company: Saudi International Petrochemical Company (Sipchem) 2- A Board Member: includes all members of Sipchem's Board of directors as well as Board committees. 3- An Executive Management Member: any individual who has an executive position in the Company including the Executive Manager and the Financial General Manager. 4- Stakeholders: Any individual who has an interest within the Company, such as shareholders, employees, creditors, customers, suppliers and community. 5- Related person: Any individual who is in relationship with any of the senior executives, Board members or a shareholder of big ratio of shares. Related parsons include: (a) The spouse and minor children ( collectively referred to as " the family of the person") (b) Family member/members of such individual who may have any interest, whether direct or indirect, in the capital of the company that enables them to: (1) Vote or have control over number of voices by 30% or more in the General Assembly with regard to all or most of the issues. (2) Appoint or dismiss Board members who own the majority of the voting rights in the Board meetings with regard to all or most of the issues. 19

20 General Provisions: 1) A Board member may not have any interest, whether directly or indirectly, in the company's activities without a prior authorization from the General Assembly, to be renewed each year. The activities to be performed through general bidding shall constitute an exception where a Board member is the best bidder. 2) The board member who has an interest, whether direct or indirect, in the Company's activities and contracts; may not be entitled to vote on the resolution of the General Assembly to be adopted in this regard. 3) A Board member shall notify the Board of Directors of any personal interest he may have in the activities and contracts that are completed for the company's account. Such notification shall be included in the minutes of the Board's meeting. 4) The Chairman of the Board of Directors shall notify the General Meeting Assembly, when convened, of the activities and contracts in respect of which a Board member may have a personal interest and shall attach to such notification a special report prepared by the Company's auditor. 5) A Board member may not, without an authorization from the General Assembly, to be renewed annually, participate in any activity which may likely compete with the activity of the Company, or to trade in any branch of the activities carried out by the Company. In this case, the Company is entitled to demand compensation of the member or consider this transaction, which is conducted for the member's account, as if is performed for the Company's account. 6) The Company may not grant cash loan whatsoever to any of its Board members or render guarantee in respect of any loan entered into by a Board member with third party. Cases of conflict of interests: Any member in the Board of Directors or the executive management must avoid conflict of interests and disclose of any cases he participated in or knew about. A member also has to carry out all activities of the Company in a manner that does not cause any kind of embarrassment to the Company or any of its Board members, managers or employees. The following are some, but not limited to, examples of circumstances that may cause conflict between personal interests and the Company's interest. There should be a reference to the Board of Directors in order to obtain the necessary guidelines regarding any dubious situation: 1. When the individual or a related person obtains personal interest from purchasing any items or services to the company or gains profits / personal interests from the transactions 20

21 he carried out or the information he obtained as a manager or an employee in the Company. 2. When the individual or the related person obtains any property in a company/ corporation that provides services or products to the Company or competes with them. Investment in public joint stock company whose shares are publicity sold to the public and in which his share does not exceed 1% of its stocks and bonds is considered an exception. Disclosure of the personal interest in such cases shall not be included in this restriction. 3. When the person or the related person has any personal interest, whether directly or indirectly, in the Company's contracts or projects. 4. Accepting or receiving any valuable gifts, presents or offers that may improperly influence their decisions or tasks to the Company. 5. Working as an official, employee or consultant at any corporation or company or authority that provide services to the Company, sell its products or compete with them and gaining any benefits thereof or seeking to do so without full disclosure of such relation. 6. Representing the Company in any activities with any business entity with which such person wish to make a relationship while working in the Company as a manager or an employee, or after leaving it unless a disclosure of such relationship is made. 7. Obtaining loans or advances from individuals or authorities that provide services or products to the Company or compete with them in service providing except for banks and financial institutions that grant such loans and advances normally. 8. Disclosure of any confidential information relating to the Company outside the scope of the Company without obtaining the necessary approval. 9. Using or allow others to make actual use of the Company's employees, materials, resources, equipments / devices for any purpose whatsoever not serving the interest of the Company unless a disclosure of such action is made. 10. Accepting salaries or rewards from third parties for services paid by the Company unless a disclosure of such act is made. 11. Conducting any transactions, not relating to the Company business, with banks, professional authorities ( such as accountants or lawyers), suppliers or any other parties that deal with the Company unless the employee is most likely sure that the Company shall not incur any costs or expenses with regard to such transactions. 21

22 12. Violating the correct accounting systems and methods that should be followed in all times. The records shall precisely reflect and clarify all the assets. Besides, all assets, claims, incomes and expenses shall be properly registered in the Company's books of accounts. 13. The Capital Market Authority as well as the public must be notified of any transaction between the Company and any other related party, or any arrangement under which both the Company and any related party shall invest in any business or asset or fund it. 14. The annual Board of Director's report shall disclose the following: A description of any transaction between the Company and any related party Any information relating to any activities or contracts in which the Company is party thereof or of interest for a Board member, the executive officer, the financial manager or any person who has a relationship with any of them. If not, the Company shall provide a declaration of that. Commitment to conflict of interests policy: Every Board Member as well as the executive management member must sign the declaration herewith of his commitment to disclose of any conflict of interests as stated by rules herein and notify the Company of all the financial interests and business relationships, whether directly or indirectly, he or any of his related persons may has, which could arise some kind of conflict of interests in the meantime. Accordingly, he must report any changes that may happen to such circumstances immediately. (Declaration) I have read the Conflict of Interest policy of the Saudi International Petrochemical Company (Sipchem) according to which this declaration is developed. I fully understand it and commit to what is stated in it. Name Job Tile Signature Date : : : : Chapter Five Company Profits Distribution Policy 22

23 The profits distribution policy of the Saudi International Petrochemical Company (Sipchem) A Saudi Joint Stock Company was developed in accordance with the requirements of the Corporate Governance Regulation of Saudi Arabia as stated in Article VII Paragraph (A) and in line with the Company s Statute, Companies Act and the Registration and Listing Rules. A) This policy shows the Company s procedures related to the way of calculating and determining the profits and declaring their distribution and also determining the way and date of distributing these profits. B) The Company declares the distribution of profits according to the annual outcomes. Article (20) - Declaring Profits Distribution A) The General Assembly shall approve the profits proposed to be distributed and the date of such distribution. Only those shares owners listed in the Company s records by the end of trading on the day of holding the General Assembly Meeting shall have the right to claim the profits whether in cash or watering capital. B) The resolution about the profits distribution shall be listed independently in the agenda of the Shareholders Ordinary General Assembly Meeting. C) The amount of profits to be distributed shall be determined by the Board of Directors immediately after approving the initial distribution of net profits for the previous year or quarterly. D) The Company shall inform the Shareholders about the procedures of distributing the profits by publishing this information on the web sites of CMA and the company. Article (21) - Sources and Amount of Profits Distribution A) The Company net profits shall be distributed after the deduction of all general expenses and other expenses as follows: 1. 10% of the net profits shall be reserved as a disciplinary standby and the General Assembly may stop the regular retain when the reverse amounted to half of the capital. 2. General Assembly shall upon the proposal of the Board to reserve a certain percentage of the net profits to be utilized for specific purposes, 23

24 3. The remainder shall be distributed to shareholders equivalent to 5% percent at least of the paid-off capital. 4. After the above ratio, a percentage not exceeding 10% of the remainder shall be allocated for rewarding the Board Members, taking into account the regulations and instructions issued by the Ministry of Commerce and Industry on this matter and then the rest shall be distributed to shareholders as an additional share of profits. Article (22) - Distribution of Declared Profits A) No interest will be added to the unclaimed profits. B) For the purpose of organizing and completing the profits payment process, the Company may hire a third party represented in one of the banks the Company deals with. Such does not relieve the Company from its legal liability before the Shareholders regarding the profits distribution. 24