Article 17 of the Saudi Commercial Court Law
المادة 17 من النظام التجاري نظام المحكمة التجارية · الفصل الثاني: في الشركات
The article provides that the profits of all partnerships are divided among the partners in the manner they agreed.
Official text (Arabic)
This article has not been amended since the law was issued.
كل الشركات تقسم أرباحها على الوجه الذي وقع الاتفاق عليه وبين الشركاء.
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 17 explained in plain English
This article sets a general rule that applies to all partnerships, whether mufawada, inan, mudaraba or the other customary partnerships referred to in Article 16: profits are divided in the manner agreed among the partners.
It follows that:
- The first reference for distributing profit is the agreement of the partners, who may set the percentages and the method.
- It is very important to draft the partnership contract clearly, because the text refers to what they agreed.
The article does not say what the rule is if the partners did not agree on a method of division, and it does not address the distribution of losses, so no rule on these two matters can be drawn from it. The text is limited to profits, and makes the partners' agreement the reference for them.
Because the text makes agreement the reference, a clear profit clause in the contract, in terms of percentages, timing and method of distribution, reduces the chance of later disputes between the partners.
When drafting a partnership contract or if a dispute arises over profits, it is advisable to consult a lawyer who specializes in companies and commercial cases.
Practical example
Three partners founded a design office in Khobar and agreed in writing that the managing partner takes 50% of the profit and the rest is divided equally between the others. Under this article the profit is divided in this agreed manner.
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 17 of the Saudi Commercial Court Law
How are a company's profits divided among the partners?
In the manner agreed among the partners, and this applies to all partnerships.
What if the partners did not agree on a profit percentage?
The article does not address this case, so it is advisable to consult a specialist lawyer to learn the applicable rule.
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 12
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.
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 وا
- 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.
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.