Article 539 of the Saudi Civil Transactions Law
المادة 539 من نظام المعاملات المدنية · الفرع الثاني: آثار عقد الشركة
The article sets the level of care required of whoever manages the partnership or deals with its funds, and bars him from acting in a way that harms the partnership or contravenes his powers or its purpose.
Official text (Arabic)
This article has not been amended since the law was issued.
1- يلتزم من يدير الشركة أو يتصرف في أموالها نيابة عن الشركاء ببذل العناية التي يبذلها في أعماله الخاصة، إلا إن كان يتقاضى عن عمله أجرًا أو حصة من الربح فليس له أن ينزل في ذلك عن عناية الشخص المعتاد.
2- ليس لمن يدير الشركة أو يتصرف نيابة عن الشركاء أن يتصرف تصرفًا يلحق الضرر بالشركة أو يخالف الصلاحيات المخولة له أو الغرض الذي أنشئت من أجله.
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 539 explained in plain English
This article sets the duties of whoever manages the partnership or deals with its funds on behalf of the partners, whether a partner or someone else.
First: the level of care (paragraph 1). The text distinguishes two cases:
- An unpaid manager: He must exercise the care he exercises in his own affairs.
- A manager who receives a fee or a share of the profit for his work: He may not fall below the care of the ordinary person. Even if he is careless in his own affairs, he is held to the ordinary level of care because he receives payment.
Second: limits on acting (paragraph 2). The manager may not act in a way that:
- harms the partnership, or
- contravenes the powers granted to him, or
- contravenes the purpose for which the partnership was established.
This article connects with Article 538, which gives every partner or his delegate the right to inspect the partnership's books and documents, so the partners can verify that the manager is complying with these limits. It is followed by Article 540, which bars whoever manages the partnership or deals with its funds from giving away or lending any of its money unless authorized.
This article does not itself state the consequence of a manager's breach of these duties. If the partnership is harmed by his acts, it is advisable to consult a lawyer specializing in civil or company matters.
Practical example
Partners in a small factory in Jeddah appointed one of them as manager in return for a percentage of the profit. The manager concluded a supply contract in an activity unrelated to the factory's purpose. This act contravenes the purpose for which the partnership was established, and because he receives a share of the profit, he must not fall below the care of the ordinary person.
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 539 of the Saudi Civil Transactions Law
What level of care is required of a partnership manager?
He exercises the care he exercises in his own affairs, and if he receives a fee or a share of the profit he may not fall below the care of the ordinary person.
What acts are barred to a partnership manager?
An act that harms the partnership, contravenes the powers granted to him, or contravenes the purpose for which it was established.
Does the obligation of an unpaid manager differ from that of a paid manager?
Yes, an unpaid manager is bound to the care he gives his own affairs, and one who receives a fee or share of the profit may not fall below the care of the ordinary person.
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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.