Case Study

Dispute Value

Review and Audit of Shareholders’ Financial Rights in a Hospitality and Tourism Company with Assets and Equity Interests Valued at Approximately SAR 4 Million

SAR 4 million

Atyar Advocates and Legal Consultants provided legal support to shareholders of a hospitality and tourism company with assets and equity interests valued at approximately SAR 4 million. The matter involved alleged breaches by the board of directors, including failure to disclose financial statements and budgets and failure to distribute profits. The firm advised the shareholders, prepared legal memoranda and correspondence, followed up with the Ministry of Commerce, engaged with the board, and referred the company’s financial records to a licensed accountant to review and determine the shareholders’ financial rights and entitlements.

Quick Matter Overview

Value of Assets and Equity Interests

Approximately SAR 4,000,000

Nature of the Company

Hospitality and tourism

Nature of the Dispute

Shareholder rights and alleged board-related breaches

Subject of the Claim

Financial disclosure, review of profits, and shareholder entitlements

Duration of the Matter

Approximately 1 year

Outcome

Obtaining, reviewing, and auditing financial statements by a licensed accountant to determine clients’ financial rights.

Background of the Dispute

The dispute involved shareholders of a hospitality and tourism company and its board of directors concerning financial disclosure, access to company records, and unpaid profits, with assets and equity interests valued at approximately SAR 4 million.Atyar Advocates and Legal Consultant reviewed the available documents, developed a legal action plan, and formally requested the company’s financial statements and budgets. A complaint was also pursued before the Ministry of Commerce. Following continued legal follow-up, the company provided the requested financial records, which were referred to a licensed accountant for review and audit to determine the shareholders’ financial entitlements and profits.The legal team then continued negotiations and correspondence with the board regarding the shareholders’ rights. The matter was ultimately resolved through an amicable settlement.

Value Involved

Approximately SAR 4 million

Nature Dispute

Shareholder–Board Dispute

Subject Claim

Financial disclosure & profits

Authorities

The company and the Ministry of Commerce

Nature of the Commercial and Shareholder Dispute

The matter focused on the review and verification of shareholders’ financial rights in a hospitality and tourism company following issues concerning non-disclosure of budgets and financial statements and uncertainty regarding the profits due to the shareholders.The legal work included reviewing the shareholders’ relationship with the company, analysing the available documents and correspondence, formally requiring the board to disclose financial information, following up the complaint before the Ministry of Commerce, and coordinating with a licensed accountant to review the financial statements and determine the clients’ financial entitlements.

Reviewing the lease, financial obligations, judgment, appeal, and settlement options to protect the client’s rights and recover outstanding rent.

Reviewing the legal relationship between the shareholders and the company.
Assessing the clients’ rights arising from their respective shareholdings.
Reviewing the alleged breaches attributed to the board of directors.
Requesting disclosure of the company’s budgets and financial statements.
Analysing the financial documents subsequently provided.
Following up the non-disclosure complaint before the Ministry of Commerce.

Preparing formal legal correspondence addressed to the board of directors.
Holding meetings concerning the shareholders’ financial rights.
Referring the financial statements to a licensed accountant.
Reviewing and auditing the financial and accounting records.
Determining the rights and profits attributable to the clients’ shareholdings.
Continuing the claim for shareholder entitlements following completion of the financial audit.

Essential Elements of the Dispute

Financial Disclosure

Obtaining the budgets and financial statements required to enable the shareholders to understand and assess the company’s financial position.

Shareholders’ Rights

Determining the financial entitlements associated with the clients’ equity interests and profit rights.

Board of Directors’ Conduct

Reviewing the alleged failures relating to disclosure and the treatment of shareholder profit entitlements.

Financial Statements

Reviewing the accounting records and budgets obtained from the company.

Accounting Audit

Engaging a licensed accountant to examine the financial statements and determine the relevant financial entitlements.

Profit Distribution

Following up the claim for profits after the clients’ financial position and entitlements had been clarified.

Key Legal Challenges

Lack of Financial Statements at the Outset

Determining the shareholders’ rights first required access to the company’s budgets and financial records, which were not initially available to them.

Intersection of Legal and Accounting Issues

The value of the clients’ profit entitlements and financial rights could not be accurately determined without specialist accounting review.

Alleged Board of Directors’ Breaches

The matter required assessment of the board’s conduct in relation to financial disclosure and the treatment of shareholder rights.

Need for Regulatory Follow-Up

Obtaining the necessary information required formal action and follow-up of a complaint before the competent authority.

Multiple Categories of Shareholder Rights

The matter required distinction between rights arising from equity ownership, profit distributions, and access to company financial information.

Achieving a Practical Resolution

The file required a combination of legal procedures, meetings, and professional accounting review to establish a reliable picture of the clients’ financial rights.

Our Legal Strategy

Assessment of the Shareholders’ Legal Position

The legal team reviewed the relationship between the clients and the company and identified the rights requiring protection or enforcement.

Formal Demand for Financial Disclosure

Legal correspondence was issued to the board of directors requesting the company’s budgets and financial statements.

Follow-Up Before the Ministry of Commerce

The regulatory route was pursued to reinforce the demand for disclosure of the relevant financial information and documentation.

Obtaining the Financial Statements

The matter was followed through until the required budgets and financial statements were provided.

Audit by a Licensed Accountant

The financial information was referred to an independent professional accountant for review and determination of the clients’ rights and profit entitlements.

Follow-Up of Rights After the Audit

Following the accounting review, the board was approached regarding the shareholders’ financial rights and profit distributions based on the results of the audit.

Legal Services Provided

Legal Advice

Advising on shareholder rights and the clients’ legal position in relation to the board of directors.

Legal Studies and Action Plans

Preparing legal studies and a structured plan for addressing financial disclosure and shareholder entitlements.

Legal Memoranda & Correspondence

Preparing legal memoranda and formal communications addressed to the company and relevant authorities.

Representation and Follow-Up

Representing the clients’ interests and following up the matter before the company and the Ministry of Commerce.

Determination of Shareholder Rights

Supporting the process of identifying and verifying the financial rights associated with the clients’ shareholdings.

Coordination of the Financial Audit

Referring the financial statements to a licensed accountant and following up the audit process to determine shareholder rights and profits.

Legal Insight

In shareholder disputes, it may be difficult to determine the precise financial entitlement of a shareholder without first obtaining the company’s financial statements, budgets, and accounting records.Protecting shareholder rights may therefore begin with securing financial disclosure and access to information, followed by legal and accounting review to determine the value of profits and other financial entitlements associated with the shareholder’s interest.Cooperation between legal counsel and a licensed accountant is particularly important where legal rights and financial or accounting issues are closely interconnected.

Legal Value Delivered to the Client

Identified the legal framework governing the shareholders’ rights.
Took the necessary steps to obtain the company’s financial statements.
Followed up the non-disclosure complaint before the Ministry of Commerce.
Secured access to the company’s budgets and financial records.
Referred the financial statements to a licensed accountant for professional review and audit.
Established the clients’ financial rights and profit entitlements through specialist accounting review.

The Firm’s Experience in Shareholder Disputes and Financial Rights

Atyar Advocates and Legal Consultants provides legal services in disputes involving shareholder rights, financial disclosure, board conduct, and the determination or settlement of rights between shareholders.The firm’s services include review of internal corporate relationships, demands for budgets and financial statements, and coordination with financial experts and licensed accountants where specialist financial analysis is required.The firm also advises on corporate law, commercial disputes, shareholder disputes, amicable settlements, financial rights, liquidation matters, and equity interests.

Legal Team Responsible for This Matter

Practice Areas Related to This Matter

Need Legal Support to Review Your Rights as a Shareholder?

If you are involved in a dispute concerning shareholder rights, non-disclosure of financial statements, profit distribution, or the determination of financial entitlements, Atyar Advocates and Legal Consultants provides legal advice, legal studies, drafting of memoranda, and representation and follow-up before companies and competent authorities.

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