• The following terms and phrases, wherever mentioned in this Law, shall have the meanings assigned thereto, unless the context requires otherwise.

• Ministry: Ministry of Commerce and Industry.

• Minister: Minister of Commerce and Industry.

• CMA: Capital Market Authority.

• CMA’s Board: CMA’s Board of Directors.

• Chairman: Chairman of CMA’s Board.

• Competent Authority: The Ministry of Commerce and Industry. As for jointstock companies listed in the Capital Market, the Competent Authority shall be CMA.

• Law: Companies Law. 

A company is defined as a contract under which two or more persons undertake to participate in an enterprise for profit, by contributing a share in the form of money, work, or both, and share profit or loss resulting therefrom.

• 1. A company incorporated in the Kingdom shall take one of the following forms:

  • a) Unlimited liability company.

  • b) Limited partnership.

  • c) Partnership.

  • d) Joint-stock company.

  • e) Limited liability company.

• 2. Without prejudice to paragraph 3 of this Article, any company not assuming any of the forms provided for in paragraph 1 of this Article shall be null and void, and persons entering into contracts under its name shall be personally and jointly liable for the obligations arising from such contract.

• 3. The provisions of the Law shall not apply to companies known in Islamic jurisprudence, unless they take the form of one of the companies set forth in paragraph 1 of this Article.

Except for a partnership, a company incorporated in accordance with the Law shall be considered a Saudi company, and its head office shall be in the Kingdom. Being a Saudi company does not necessarily qualify for rights limited to Saudi citizens.

1. A partner’s contribution may be in cash or in-kind. The contribution may also take the form of work, but it may not be in the form of reputation or influence.

2. Only cash and/or in-kind contributions shall form the company’s capital. Such capital may be altered only in accordance with the provisions of the Law and in conformity with conditions set forth in the company’s articles of incorporation or articles of association.

• 1. If a partner’s contribution is in the form of a right of ownership or usufruct or any other in-kind right, the partner shall, in accordance with the provisions of the sale contract, be liable for the guarantee of his share in case of loss, claim for recovery or the discovery of any defect or shortage therein. If a partner’s contribution is only in the form of a benefit from a personal right to a property, the provisions of the lease contract shall apply.

• 2. If a partner’s contribution is in the form of a claim against third parties, he shall not be relieved from liability towards the company except after he collects such claim and places it at the company’s disposal during the prescribed period.

• 3. If a partner’s contribution is in the form of work, he shall carry out such work, and any earnings resulting from it shall be the property of the company. The partner may not engage in such work for his own benefit. He shall be under no obligation to submit to the company any patent rights he may have obtained, unless agreed otherwise.

A partner shall be indebted to the company for the equity he pledges. If he fails to deliver such equity by the due date, he shall be liable to the company for any damage arising from the delay.

1. A personal creditor of any partner may not have his rights enforced against the partner’s share in the company’s capital. However, he may, upon obtaining a judgment from the competent judicial authority, have such rights enforced against the partner’s share in the dividends as stated in the company’s financial statements. Upon termination of the company, the creditor’s claim shall be transferred to the partner’s share in the remainder of the company’s assets after paying the company’s debts.

2. A personal creditor of a shareholder may, in addition to the rights provided for in paragraph 1 of this Article, petition the competent judicial authority to sell an adequate number of shares necessary for the settlement of the debt, provided that shareholders in unlisted joint-stock companies have the right of first refusal.

1. Without prejudice to paragraph 2 of this Article, all partners shall share profits and losses. If the partners agree to deprive any partner of profits or exempt him from losses, this condition shall be null and void, and the provisions of Article 11 of the Law shall apply.

2. A partner whose contribution is solely in the form of work shall be exempted from sharing losses.