The National Center for Development of the Non-Profit Sector in the Kingdom of Saudi Arabia has issued the updated executive regulations for the Law of Associations and Foundations. The new regulations will soon come into effect, obligating all existing entities to adjust their operations and activities in accordance with the updated provisions within one calendar year of their publication. This strategic move aims to govern the non-profit sector and empower it to become an active partner in the comprehensive development the country is witnessing.
Historical context of the development of the non-profit sector in the Kingdom
Historically, charitable and volunteer work in Saudi Arabia has undergone several organizational phases, from individual efforts and traditional charitable organizations to the comprehensive institutionalization we see today. With the launch of Saudi Vision 2030, the urgent need to develop this vital sector became apparent, as the Vision aims to increase the non-profit sector's contribution to the GDP from less than 1% to 5%. To achieve this ambitious goal, the National Center for the Development of the Non-Profit Sector was established as the official body that regulates, supports, and monitors the performance of associations and institutions, paving the way for the sector's transition from a welfare-based approach to sustainable development.
Key provisions of the new associations regulations for protecting donations
The new regulations for associations emphasize the complete separation of Zakat funds from other revenues. Non-profit entities are required to establish a separate bank account and maintain a dedicated register for these funds to ensure their disbursement in accordance with Islamic Sharia principles. The new regulations also outline the establishment requirements, stipulating that a minimum of ten legally competent Saudi nationals must submit an application, with their records free of any convictions for dishonesty or breach of trust. In a pioneering step towards youth empowerment, the regulations grant those who have reached the age of fifteen the right to join and vote in general assemblies, thus fostering a culture of volunteerism and civic engagement at a young age, while preserving the right to run for board positions for older individuals.
Enhancing transparency and preventing the monopolization of administrative positions
To ensure a renewal of leadership and improved performance, the center emphasized the regulation of board term limits to prevent the monopolization of positions, stipulating that each term should not exceed four years. The regulations also require explicit approval from the general assembly if a member wishes to run for more than two consecutive terms. Furthermore, the regulations outline strict safeguards for donation funds, prohibiting boards from making financial decisions outside the scope of the bylaws without prior authorization, and mandating the appointment of a certified external auditor for rigorous oversight. The regulations also definitively closed the door to conflicts of interest, prohibiting all center employees and supervisory bodies from working for associations in any administrative or contractual capacity.
Expected developmental impact at the local and regional levels
This regulatory update is of paramount importance and is expected to have a far-reaching impact both locally and regionally. Locally, this robust governance will enhance the confidence of donors and supporters, leading to increased donations and their precise allocation to those in need and development projects. Regionally and internationally, the Kingdom's commitment to implementing the highest standards of transparency and combating money laundering and terrorist financing in the non-profit sector makes the Saudi model a benchmark for the region. This regulation reflects the Kingdom's commitment to international standards, further strengthening its position in global humanitarian and development indicators.
Broad oversight powers to ensure the sustainability of charitable work
The regulations grant the center broad oversight powers, enabling it to intervene immediately by dismissing any board of directors, appointing a temporary replacement, or suspending executive officials in cases of serious violations of regulations, public morals, or Islamic law. The decision also stipulates the reorganization of coordinating councils by establishing a council for non-profit organizations and another for institutions, with the aim of unifying efforts, representing the sector regionally and internationally, and forming regional and specialized committees to enhance performance quality. The center warned that failure to rectify the situation within the specified one-year period will subject the organization to strict disciplinary measures, ranging from warnings to suspension of activities or outright dissolution. This pivotal decision will take effect ninety days after its official publication, superseding all previous regulations and ushering in a new era of governance and institutional transparency for charitable and developmental work in the country.
