* Founder and son sentenced to jail over IPO
* Company ordered to pay $427 million in damages
* No plan to form new board
* Says its future now up to regulator, other shareholders
* Calls for overhaul of Saudi construction sector
By Andrew Torchia
DUBAI, June 20 (Reuters) - An effort to restructure indebted Saudi Arabian builder Mohammad Al Mojil Group (MMG) was thrown into doubt on Monday when the firm said its board had resigned after three people involved with the company were sentenced to jail.
The resignations added to turmoil in the Saudi construction industry, which is struggling as the government cuts spending in response to low oil prices, prompting companies to lay off tens of thousands of foreign workers.
Last week, the stock market regulator ordered MMG to pay it damages of 1.6 billion riyals ($427 million) and sentenced three people, including founder Mohammad Al-Mojil and his son Adel Al-Mojil, the chairman, to between three and five years in prison.
They were found guilty by the Capital Market Authority's Committee for the Resolution of Securities Disputes of manipulation and fraud relating to the family-controlled company's initial public offer (IPO) of shares in 2008.
In a statement on Monday, MMG said the committee's decision was based on "fundamentally flawed" evidence and had severely hurt the board's ability to run the company.
"The decision to resign is, in part, due to their serious concerns about the unlimited director and executive liabilities in the Kingdom of Saudi Arabia," MMG said.
In a subsequent statement to Reuters, the company said it had close to 100 million riyals of projects underway and a huge fleet of equipment, but no plan to form a new board.
"It is now up to the other shareholders of the company and the Capital Market Authority to decide upon the next steps for the company," it said.
The CMA, which said the committee's decision was not final and could be appealed, charged that "illegal profits" were made during the IPO through the difference between the shares' value in the offer and their real value.
The shares have not traded on the Saudi bourse since July 2012, when the CMA suspended the stock over losses which the company incurred as it over-extended itself trying to take advantage of a construction boom in the kingdom.
Since then MMG, which once employed 25,000 people, has been trying to rebuild itself, partly by seeking hundreds of millions of riyals which it says it is owed by other firms for its work.
MMG said on Monday that before the committee's decision, the recovery had been going well, with the company posting a net profit in the first quarter of this year - its first profit since 2012.
The board had also helped to prepare a capital restructuring plan that could have paved the way for MMG shares to resume trading, it said. Creditors could have been offered a settlement which gave them preferred shares in MMG, under a law introduced this year allowing such instruments to be offered in the country for the first time.
Some of the kingdom's biggest construction conglomerates, including Saudi Binladin Group and Saudi Oger, have been laying off staff as the government has responded to shrinking oil revenues by delaying some payments to the companies. Thousands of workers have gone unpaid by their companies for months.
"Recent events highlight the dire need for a systematic and far-reaching overhaul of the construction sector in the Kingdom of Saudi Arabia as well as the regulations which govern these firms," MMG said in its statement.
(Reporting by Andrew Torchia; Editing by Keith Weir and Mark Potter)
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