5 years after the stock was discontinued.. “Darb” for Arabic: Compensating shareholders with $18.5 million

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Vice Chairman and CEO of Darb Saudi Investment Company, Ibrahim bin Abdullah bin Kulaib, confirmed that the final ruling issued in favor of the company obliging 6 former board members to pay about $18.45 million (69.2 million Saudi riyals) was the result of a case whose roots go back to an asset exchange deal concluded during the period between 2010 and 2013, indicating that the company has already begun judicial enforcement procedures to collect the amounts awarded.

Bin Kulaib said in an interview with Al Arabiya Business that the case goes back to the previous Board of Directors session, which extended from February 10, 2010 until February 9, 2013, when the Board at that time concluded an agreement with the Modern Bright Contracting Company that included exchanging assets owned by the company for other assets belonging to the counterparty.

He added that the company's relinquished assets included land in Al Aqiq Governorate in Al Bahah region with an area exceeding 993 thousand square metres, and a share in lands in the Al Murooj scheme in Taif, in addition to shares owned by the company in Al Bahah National College, in exchange for the acquisition of a crusher, a concrete project, and a "holocor" project owned by Al Brighta Company, with a total value amounting to 86 million riyals, according to the approved valuation at the time of executing the deal.

He explained that the crisis began after the revaluation of the assets subject to the deal, as it turned out that the assets acquired by the company did not exceed the value of 17 million riyals, which revealed a large gap compared to the value on which the exchange was carried out.

Bin Kulaib said that this large discrepancy in evaluations led to the emergence of a legal dispute and the opening of the deal file, indicating that the new board that took over the management of the company in February 2013 began working on collecting the necessary documents, papers, and evidence to prove the damage to the company and its shareholders.

He added that the case was complex due to its large size and its connection to a large number of documents, which required a long time to complete the legal file before proceeding with the official procedures before the competent authorities.

He pointed out that the company filed a lawsuit against the former members of the Board of Directors with the Capital Market Authority to demand compensation for the company for the damages that resulted from the deal, explaining that the file witnessed multiple judicial stages that ended with a ruling in favor of the company before it was upheld on appeal. Then the reconsideration petition submitted by one of the former Board members was rejected, so that the ruling became final and must be implemented.

He pointed out that the damages resulting from the deal were not limited to direct financial losses, but rather extended to the company’s shareholders, explaining that the stock was suspended for several years between 2013 and 2017 and was at risk of being delisted, which caused huge losses to investors.

Bin Kulaib said that the company has already obtained a limited portion of the amounts awarded, while implementation procedures are currently continuing through the competent judicial authorities and in cooperation with the company’s legal advisors, with the completion of all legal requirements necessary to collect the full amount.

He added that the administration is awaiting the completion of the implementation court procedures without specifying a precise time frame for collecting all dues, given that the matter is related to the ongoing judicial and executive process.

Regarding the company’s plans to benefit from the compensation after it is collected, Bin Kulaib confirmed that the priority will be to compensate for the damages caused to shareholders as a result of this case, indicating that management intends to use the recovered funds in investments and projects that strengthen the company’s conditions, support shareholders’ rights, and reflect positively on its future performance.

He pointed out that the final ruling obligated the former board members to pay about 68.7 million riyals in compensation for direct damages to the company, in addition to 500 thousand riyals for attorney’s fees and legal costs, for a total of 69.2 million riyals.