Article 12 of the Saudi Commercial Court Law
المادة 12 من النظام التجاري نظام المحكمة التجارية · الفصل الثاني: في الشركات
The article defines the mufawada (general partnership) company as one with known equal capital, in which partners are jointly and severally liable for the company's undertakings.
Official text (Arabic)
This article has not been amended since the law was issued.
شركة المفاوضة المعبر عنها بشركة التضامن هي الشركة المنعقدة تحت إمضاء عموم الشركاء على رأس مال معلوم متساو ويكون جميع الشركاء متضامنين متكافلين في كل التعهدات والمقاولات المندرجة في السندات التي أمضاها الشركاء المأذونون في كل الأعمال التجارية.
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 12 explained in plain English
This article explains the first type of company mentioned in Article 11, the mufawada company, and makes clear that it is the one referred to as the general partnership (tadamun).
Its characteristics according to the text:
- It is formed under the signature of all the partners, that is, signed by all of them.
- It is based on known, equal capital among the partners.
- All the partners are jointly and severally liable for all undertakings and contracts contained in the instruments signed by the authorized partners in all commercial dealings.
The practical effect of joint liability is that each partner bears with his partners the company's obligations arising from the instruments signed by the authorized partners, and not only up to his share. This differs from the inan company in Article 13, in which the partner bears no harm or loss beyond his share of the capital.
Note that joint liability in the text is tied to the instruments signed by the authorized partners. Because the liability of a partner in a general partnership is wide, it is advisable to consult a lawyer who specializes in companies before entering this kind of partnership.
Practical example
Three brothers in Qassim set up a mufawada company with equal capital, and one of them, who is authorized, signs a supply contract in the company's name. Under this article, the three brothers are jointly and severally liable for this obligation.
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 12 of the Saudi Commercial Court Law
What is a mufawada company?
It is the general partnership, formed under the signature of all the partners on known, equal capital, in which the partners are jointly and severally liable.
Is a partner in a general partnership liable for the company's obligations?
Yes. The partners are jointly and severally liable for all undertakings and contracts contained in the instruments signed by the authorized partners.
How does it differ from the inan company?
In the inan company (Article 13) the partner bears no loss beyond his share, whereas the partners in the mufawada company are jointly liable.
More articles on Companies Under the Commercial Law
- Article 11
The article defines a company as a contract between two or more people to make a lawful profit, and divides companies into mufawada, inan and mudaraba.
الشركة عقد بين اثنين فأكثر يلتزم به تصرف مخصوص لتحصيل ربح مشروع؛ وهي ثلاثة أنواع: شركة المفاوضة ، وشركة العنان ، وشركة المضاربة .
- Article 13
The article defines the inan company as one with known capital in which each partner has a specific share, and no partner bears a loss beyond his share.
شركة العنان هي الشركة المنعقدة بين اثنين فأكثر على رأس مال معلوم لكل من الشركاء حصة معينة فيه ولا يتحمل الشريك ضررا ولا خسارة زيادة على حصته من رأس المال.
- Article 14
The article defines the joint-stock company as a branch of the inan company whose capital is divided into shares and which is managed by chosen agents who are not personally liable for its undertakings.
من فروع شركة العنان المساهمة وهي الشركة المنعقدة على رأس مال معلوم يقسم إلى أسهم، والأسهم إلى حصص متساوية المبالغ من غير تسمية أصحاب الحصص، ويتولى إدارتها وكلاء
- Article 15
The article defines the mudaraba company as one in which one party provides the capital and the other the work, and all share in the profit.
شركة المضاربة هي الشركة المنعقدة على أن يكون رأس المال من طرف والعمل من الطرف الآخر لاشتراك الجميع في الربح الحاصل.
- Article 16
The article provides that there are other partnerships customary among merchants that are not listed, and their customary requirements apply to them.
ما عدا الشركات المذكورة آنفا توجد شركات أخرى متعارفة بين التجارة تجري فيها مقتضياتها.
- Article 17
The article provides that the profits of all partnerships are divided among the partners in the manner they agreed.
كل الشركات تقسم أرباحها على الوجه الذي وقع الاتفاق عليه وبين الشركاء.
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.