Endowments Authority: Mandatory judicial authorization to dispose of endowment assets

In a regulatory move aimed at strengthening governance and protecting endowment assets in Saudi Arabia, the General Authority for Endowments has approved new regulations requiring endowment administrators to obtain prior judicial authorization before making any dispositions of endowment assets. This decision is part of broader efforts to ensure the sustainability of endowed funds and fully realize the intentions of the donors, in line with the Kingdom’s Vision 2030 for developing the non-profit sector.

The historical and organizational context of endowments in the Kingdom

Endowments (waqf) are a cornerstone of Islamic civilization, having played a pivotal role throughout history in funding social, educational, and healthcare services. In Saudi Arabia, the endowment sector holds particular importance due to its developmental and social significance. The sector witnessed a qualitative leap with the establishment of the General Authority for Endowments in 2015, which was tasked with regulating, preserving, and developing endowments to enhance their role in economic and social development. The Authority is working to develop legal and regulatory frameworks that ensure transparency and efficiency in managing endowment assets, and this latest measure is a crucial step in these regulatory efforts.

Details of the decision and its main objectives

The authority clarified in its statement that the disposal of endowment assets is subject to precise Sharia and legal controls, emphasizing that "the endowment administrator may not dispose of endowment assets without obtaining permission from the competent court" if the public interest so requires. This procedure aims to achieve several strategic objectives, most notably:

• Strengthening governance and oversight: The requirement of judicial authorization adds an additional layer of legal oversight, preventing any potential abuses or individual decisions that could harm the endowment asset or disrupt its benefits.
• Protecting the rights of the endowers and beneficiaries: The decision ensures that any action regarding the endowment, whether by sale or exchange, is taken after careful judicial review to ensure that it achieves the best interests of the endowment and is in accordance with the endower's condition.
• Ensuring financial sustainability: By subjecting decisions regarding the disposal of assets to court oversight, it is ensured that these decisions are economically sound and aimed at developing the endowment rather than liquidating it, thus guaranteeing its survival and growth for future generations.

Expected impact on the endowment sector

This decision is expected to have a significant positive impact on the endowment sector in the Kingdom. Domestically, it will increase the confidence of donors and the community in the management of endowments, potentially encouraging an increase in the size of new endowments. It also establishes a clear framework for trustees and protects them by providing legal cover for their decisions regarding assets. Regionally, this step reinforces the Kingdom's position as a leading model in developing and modernizing endowment management in accordance with global best practices in governance and transparency, which may inspire other countries to adopt similar regulatory measures to maximize the impact of their endowments.