A significant legal move by Saudi Cable Company
In a move reflecting a radical shift in its management and a move towards correcting its financial and legal course, Saudi Cable Company, listed on the Saudi Stock Exchange (Tadawul), announced that it has filed two separate lawsuits before the Commercial Court in Jeddah. The lawsuits target Rawafed Al-Mustaqbal Investment Company and Tathmeer Investment Company, seeking to invalidate debt transfer agreements that the company believes were carried out with significant procedural and substantive violations.
Background of the conflict and its significance within the company context
Saudi Cable Company is one of the oldest industrial companies in the Kingdom and the Middle East, having been established in 1975 and playing a pivotal role in infrastructure development. However, in recent years, the company has faced significant financial and operational challenges, prompting it to undertake extensive restructuring. These lawsuits come within the context of the current management's efforts to audit and review past commitments and contracts, particularly those that may affect shareholders' rights and increase the company's financial burdens in irregular ways, representing a crucial step in its recovery.
First issue: Dispute with “Future Streams”
The first lawsuit against Rawafed Al-Mustaqbal revolves around a request to invalidate an assignment of rights agreement related to an outstanding debt owed by Saudi Cables to Noble Resources International. Specifically, Rawafed Al-Mustaqbal purchased this debt of SAR 101.9 million after receiving a substantial discount of SAR 68.17 million from the original creditor. However, the core dispute arose when Rawafed demanded that the entire original debt (SAR 101.9 million) be converted into shares of Saudi Cables at par value (SAR 10 per share), based on a contract concluded by the company's previous management.
Saudi Cables bases its claim on several reasons, the most important of which are:
- There are formal and substantive violations in the concluded contract.
- The contract was signed by former officials who do not have the legal authority to conclude such an agreement, which entails an increase in capital.
- The current Board of Directors, which has the authority, categorically rejected the agreement in its resolution dated July 17, 2024.
The first court hearing was scheduled for 28 Sha'ban 1447 AH. The company explained that if the lawsuit is accepted, the situation will revert to what it was before the agreement was signed, thus preventing current shareholders from experiencing a significant reduction in their shares.
The second issue: A confrontation with “Tathmeer Investment”
Similarly, Saudi Cable Company filed a second lawsuit against Tathmeer Investment Company to invalidate a similar assignment agreement. Tathmeer had purchased a debt owed by Saudi Cable Company to Al Rajhi Bank for SAR 232.77 million, after receiving a discount of SAR 77.77 million. As in the first case, Tathmeer demanded that the entire original debt amount be converted into shares at par value.
Saudi Cable Company asserts that the grounds for this lawsuit lie in the fact that the agreement was marred by fundamental irregularities and was signed by an individual lacking the legal authority to represent the company at the time. Most importantly, the Extraordinary General Assembly, the highest authority in such matters, rejected the agreement at its meeting held on June 22, 2025. The court hearing for this case has been scheduled for Ramadan 7, 1447 AH.
Expected impact and importance of issues for the Saudi market
These two cases are of paramount importance, extending far beyond the parties involved, as they represent a true test of corporate governance principles in the Saudi market. If Saudi Cable Company succeeds in invalidating these agreements, it will strengthen the authority of boards of directors and general assemblies to protect the rights of companies and their shareholders from any transgressions by executive management. It will also send a powerful message to local and international investors that the Kingdom's legislative and judicial environment is capable of enforcing transparency and governance standards, which aligns with the goals of Vision 2030 to enhance the attractiveness of the Saudi financial market.
