Article 531 of the Saudi Civil Transactions Law
المادة 531 من نظام المعاملات المدنية · الفرع الأول: إنشاء عقد الشركة
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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؛ ما لم يتفق على خلاف ذلك.
2- يصح أن يتفاوت الشركاء فيما يلتزمون به في ذممهم من مالٍ أو عملٍ، أو أن تكون الآلات والأدوات اللازمة للعمل من بعضهم.
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 531 explained in plain English
This article deals with a form of partnership based on what the partners undertake in their obligations.
Paragraph (1): A partnership may be based on the joint liability of the partners for what they undertake in their obligations of money or work for the benefit of the partnership. It follows that each partner's share in the capital is equal to what he undertook, unless the partners agree otherwise. A partner who undertook a larger portion has a larger share, unless they agreed on a different distribution.
Paragraph (2): It provides two flexibilities:
- The partners may differ in what they undertake in their obligations of money or work; equality is not required.
- The machines and tools needed for the work may come from some of them and not from the others.
This article is consistent with Article 530, which bars a partner's influence, reputation or financial credibility from being a share; the undertaking here is an actual undertaking of money or work in the partner's obligations. It is followed by Article 532, which 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.
The article does not detail the effects of joint liability toward creditors. If you want to set up a partnership on this basis, it is advisable to consult a lawyer specializing in civil or company matters to draft the contract clearly.
Practical example
Three carpenters in Taif agreed to work together on furniture orders. Each undertook in his obligations a different portion of the work, and one of them provided the necessary machines. This arrangement is allowed, and each one's share is equal to what he undertook unless they agree on another distribution.
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 531 of the Saudi Civil Transactions Law
May a partnership be based on what the partners undertake in their obligations?
A partnership may be based on the joint liability of the partners for what they undertake in their obligations of money or work for its benefit.
How is a partner's share in this partnership determined?
It is equal to what he undertook in his obligations, unless otherwise agreed.
Must the partners be equal in work or money?
No, they may differ in what they undertake, and the machines and tools may come from some of them.
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 530
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.
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 الشر
- 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.