Article 530 of the Saudi Civil Transactions Law
المادة 530 من نظام المعاملات المدنية · الفرع الأول: إنشاء عقد الشركة
The article bars a partner's influence, reputation or financial credibility from being his share, explains how a non-cash share is valued, and says when a partner's obligation ends if his share is a debt owed by a third party.
Official text (Arabic)
This article has not been amended since the law was issued.
1- لا يصح أن تكون الحصة أو بعضها ما للشريك من نفوذ أو سمعة أو ثقة مالية.
2- إذا كانت حصة الشريك غير نقدية، قُدرت الحصة بقيمتها عند التعاقد أو بما يتفق عليه الشركاء من أسس صالحة لتقديرها.
3- إذا كانت حصة الشريك دينًا لدى الغير، لم ينقض التزام الشريك بتقديم الحصة إلا بعد تحصيله الدين وتسليمه للشركاء.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 530 explained in plain English
This article sets out three rules concerning a partner's share:
First: what cannot be a share. A share or part of it cannot be a partner's influence, reputation, or financial credibility. It is not enough for a person to join as a partner because his name is well known, because he has connections, or because people trust his solvency, unless he contributes money or work in line with the definition of the partnership in Article 529.
Second: valuing a non-cash share. If a partner contributes a non-cash share, such as real estate, a car or equipment, it is valued by one of two things:
- its value at the time of contracting, or
- the sound bases for valuing it that the partners agree on.
Third: a share that is a debt owed by a third party. If a partner contributes his share in the form of a debt owed to him by another person, his obligation to contribute the share ends only after he collects the debt and hands it over to the partners. He is not discharged merely by assigning the debt; he remains bound until the money actually reaches the partners.
It is followed by Article 531, which allows a partnership to be based on the partners' joint liability for what they undertake in their obligations of money or work for its benefit.
To value an in-kind share or draft the shares clause in a partnership contract, it is advisable to consult a lawyer specializing in civil or company matters.
Practical example
Waleed joined as a partner in a supply establishment in Dammam, and made his share a debt owed to him by one of his customers in the amount of SAR 200,000. Waleed is not discharged from contributing his share merely by the agreement; he remains bound until he collects the debt from the customer and hands it over to the partners.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 530 of the Saudi Civil Transactions Law
Can a partner's share be his reputation or connections?
No, a share or part of it cannot be a partner's influence, reputation or financial credibility.
How is a partner's share valued if it is real estate or equipment?
It is valued at its value at the time of contracting or by sound bases for valuing it that the partners agree on.
When is a partner discharged if his share is a debt owed by another person?
His obligation ends only after he collects the debt and hands it over to the partners.
More articles on Partnership and Mudaraba
- Article 528
The article requires partnership contracts and their amendments to be in writing or be void, while barring reliance on the voidness against third parties and limiting its effect between the contracting parties to the period after a voidness claim is filed.
1- يجب أن تكون عقود المشاركة الواردة في هذا الباب مكتوبة، وإلا كانت باطلة، ولا يجوز أن يحتج المتعاقد بالبطلان تجاه الغير، ولا يكون للبطلان أثر فيما بين المتعاقد
- Article 529
The article defines the partnership as a contract under which two or more partners contribute a share of money, work, or both to a project in order to divide its profit or loss, and excludes partnerships governed by special legal provisions.
1- الشركة عقد يسهم بمقتضاه شريكان أو أكثر بتقديم حصة من مال أو عمل أو منهما معًا في مشروع لاقتسام ما ينشأ عنه من ربح أو خسارة. 2- لا تسري أحكام هذا الفصل على ال
- Article 531
The article allows a partnership to be based on the partners' joint liability for what they undertake in their obligations for its benefit, makes each partner's share in the capital equal to what he undertook unless otherwise agreed, and allows partners to differ in their obligations.
1- يصح أن تقوم الشركة على أساس تضامن الشركاء فيما يلتزمون به في ذممهم من مال أو عملٍ لمصلحة الشركة، وتكون حصة كل منهم في رأس مال الشركة بقدر ما التزم به في ذمته
- Article 532
The article provides that each partner's share is determined by what he undertook in the partnership contract, and that he may not increase it except with the consent of the other partners.
تتحدد حصة كل شريك بالحصة التي التزم بها في عقد الشركة، ولا يجوز للشريك زيادة حصته عن الحصة المحددة في عقد الشركة إلا بموافقة باقي الشركاء.
- Article 533
The article subjects the guarantee of a partner's share to the rules of sale if it is a right of ownership or another real right, and to the rules of lease if it is merely the use of property.
إذا كانت حصة الشريك حق ملكية أو أي حق عينيّ آخر فإن أحكام البيع هي التي تسري على ضمان الحصة إذا هلكت أو استحقت أو ظهر فيها عيب، وإذا كانت الحصة مجرد الانتفاع با
- Article 534
The article makes the division of profits in proportion to each partner's share unless otherwise agreed, and distributes losses in proportion to each partner's share.
1- تكون قسمة الأرباح بين الشركاء بنسبة حصة كل شريك في الشركة، ما لم يتفق على خلاف ذلك. 2- توزع الخسائر بين الشركاء بنسبة حصة كل منهم في الشركة.
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.