Article 544 of the Saudi Civil Transactions Law
المادة 544 من نظام المعاملات المدنية · الفرع الثالث: انتهاء عقد الشركة
A partnership contract ends when its purpose is achieved or its term expires, the partners may agree to extend it, the partners' continuing the work afterward is a renewal, and a partner's creditor may object to it.
Official text (Arabic)
This article has not been amended since the law was issued.
1- ينتهي عقد الشركة بانقضاء الغرض الذي أنشئت من أجله أو بانقضاء مدته، ويجوز باتفاق الشركاء مد أجله قبل انقضاء المدة.
2- إذا انقضت المدة المعينة للشركة أو انتهى الغرض الذي أنشئت من أجله ثم استمر الشركاء في عمل من نوع الأعمال التي أنشئت لها الشركة، كان ذلك تجديدًا لعقد الشركة بشروطه الأولى عدا ما يتعلق منها بتعيين مدة الشركة، وتسري عليها أحكام الشركة غير معينة المدة.
3- لدائن أحد الشركاء أن يعترض على تجديد عقد الشركة، ويترتب على اعتراضه عدم نفاذ تجديد العقد في حقه.
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 544 explained in plain English
This article sets out the causes by which a partnership contract ends that relate to its term and purpose, and the rule when the partners continue working afterward.
First: ending and the possibility of extension. A partnership contract ends in one of two ways:
- Achieving the purpose for which the partnership was established.
- Expiry of its term.
The partners may agree to extend the partnership's term before the term expires.
Second: implied renewal. If the term expires or the purpose is achieved and the partners then continue working in work of the kind for which the partnership was established, that is regarded as a renewal of the partnership contract on its original terms, except the term relating to fixing its duration, so the partnership becomes of unspecified duration and its rules apply to it.
Third: protecting a partner's creditor. A creditor of one of the partners may object to the renewal of the partnership contract, and as a result of his objection the renewal does not take effect against him.
The effect of renewal appears in Article 545, which allows a partner in a partnership of unspecified duration to withdraw at any time on conditions, unlike a partnership of fixed duration. Article 543 also sets out the partners' liability for the partnership's debts.
To verify whether a partnership has ended or been renewed in a particular case, a lawyer specializing in company matters can be consulted.
Practical example
Khaled and Fahd agreed on a civil partnership with a term of two years to run a cafe in Abha. The two years ended and they did not sign an extension, but they continued running the cafe. This is regarded as a renewal of the partnership on its original terms, but it becomes of unspecified duration. If one of the partners had a creditor who objected to the renewal, the renewal would not take effect against him.
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 544 of the Saudi Civil Transactions Law
When does a partnership contract end?
It ends when the purpose for which it was established is achieved or its term expires.
What if the partners continue working after the partnership's term ends?
That is regarded as a renewal of the partnership contract on its original terms except fixing the term, and the rules of a partnership of unspecified duration apply to it.
Can the partnership's term be extended?
Yes, the partners may agree to extend it before the term expires.
May a partner's creditor object to the partnership's renewal?
Yes, a creditor of one of the partners may object, and as a result of his objection the renewal does not take effect against him.
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 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
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.