Article 113 of the Saudi Companies Law
المادة 113 من نظام الشركات · الفرع الأول: الأسهم
The article allows the articles of association, with the approval of 90% of voting shares, to let the majority compel the minority to sell to a good-faith buyer, and the minority to require the majority to secure the sale of its shares on the same terms.
Official text (Arabic)
This article has not been amended since the law was issued.
دون إخلال بنظام السوق المالية، يجوز أن ينص في نظام الشركة الأساس بعد موافقة المساهمين الذين يمثلون (تسعين في المائة) من أسهم الشركة التي لها حقوق تصويت على الأقل، على الآتي:
أ- أن يكون لأكثرية المساهمين إلزام الأقلية بقبول عرض من مشترٍ حسن النية لشراء جميع أسهم الشركة بذات السعر والشروط والأحكام الخاصة بشراء أسهم الأكثرية.
ب- أن يكون لأقلية المساهمين إلزام الأكثرية بضمان بيع أسهم الأقلية في الحالات التي يبيع فيها الأكثرية أسهمهم بذات السعر والشروط والأحكام الخاصة ببيع أسهم الأكثرية.
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 113 explained in plain English
This article regulates two well-known situations in company sales that allow shares to be sold collectively and on uniform terms.
Condition for including them in the articles of association: the company's articles of association may provide for them after the approval of shareholders representing at least 90% of the company's shares that carry voting rights, without prejudice to the Capital Market Law.
First case, compelling the minority to sell:
The majority of shareholders may require the minority to accept an offer from a good-faith buyer to purchase all of the company's shares, at the same price and on the same terms and conditions as the purchase of the majority's shares. The benefit is that the minority cannot block a sale of the whole company.
Second case, the minority's right to join the sale:
A minority of shareholders may require the majority to secure the sale of the minority's shares in cases where the majority sells their shares, at the same price and on the same terms and conditions as the sale of the majority's shares. The benefit is that the majority cannot sell at a premium and leave the minority with a new owner.
Important safeguards in the text:
- Neither right exists unless the articles of association provide for it with the approval of 90% of the voting shares.
- The price, terms and conditions must be the same for the majority and the minority.
- In the first case, the buyer must be acting in good faith.
The article does not specify what percentage counts as a "majority" or a "minority", so refer to what the articles of association provide. Because these clauses have a great effect when a company is sold, it is advisable to consult a lawyer who specializes in companies and commercial disputes when drafting them.
Practical example
The articles of association of a joint stock company in Jeddah provide, with the approval of 95% of the voting shares, for the majority's right to compel the minority to sell. The company then received an offer from a good-faith investor to buy all of its shares at SAR 40 per share, and the majority accepted. The small shareholders are bound to sell their shares to the investor at the same price and on the same terms on which the majority sold.
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 113 of the Saudi Companies Law
Can a minority shareholder be compelled to sell their shares?
This is permitted if the articles of association provide for it with the approval of 90% of the voting shares, and the offer is from a good-faith buyer to purchase all the shares at the same price and on the same terms offered to the majority.
Does the minority have the right to sell alongside the majority at the same price?
The articles of association may provide for the minority's right to require the majority to secure the sale of its shares at the same price, terms and conditions when the majority sell their shares.
What percentage is required to include these provisions in the articles of association?
The approval of shareholders representing at least 90% of the company's shares that carry voting rights.
More articles on Shares and Capital Increase
- Article 25
The article states when ownership of shares and stock transfers: by commercial register entry for partnership and limited liability shares, by shareholders' register entry for unlisted joint stock and simplified companies, and under the Capital Market Law for listed ones.
1- تنتقل ملكية الحصص في شركة التضامن وشركة التوصية البسيطة والشركة ذات المسؤولية المحدودة بالقيد لدى السجل التجاري، ولا يُعتد بنقل ملكية الحصة في مواجهة الشركة
- Article 34
Article 34 allows a partner's or shareholder's personal creditor to ask for the sale of what is needed of their shares or stock to collect their right, with other partners' right of redemption and shareholders' priority in specified cases.
مع مراعاة أحكام نظام ضمان الحقوق بالأموال المنقولة، والأنظمة الأخرى ذات العلاقة، للدائن الشخصي للشريك أو المساهم -فضلًا عن الحق المشار إليه في المادة (الثالثة و
- Article 59
Article 59 requires a joint stock company's issued capital to be at least SAR 500,000, with not less than one quarter paid at formation.
يجب ألا يقلّ رأس مال شركة المساهمة المصدر عن (خمسمائة ألف) ريال، ويجب ألا يقلّ المدفوع منه عند التأسيس عن (الربع).
- Article 60
Article 60 states that a joint stock company has an issued capital representing subscribed shares and may have an authorized capital, within which the board may increase the issued capital once it has been paid in full.
1- يكون لشركة المساهمة رأس مال مصدر يمثل الأسهم المكتتب بها، ويجوز أن يحدد نظام الشركة الأساس رأس مال مصرحًا به. 2- يجوز بقرار من مجلس إدارة الشركة زيادة رأس ال
- Article 62
The article requires the founders, if they do not subscribe to all the company's shares themselves during incorporation, to offer the remaining shares for subscription in accordance with the Capital Market Law.
إذا لم يقصر المؤسسون خلال مرحلة التأسيس الاكتتاب بجميع الأسهم على أنفسهم، وجب عليهم طرح الأسهم التي لم يكتتبوا بها للاكتتاب وفقًا لنظام السوق المالية.
- Article 63
The article gives the Ministry and the Authority the power to set the controls, procedures, documents and approvals for incorporating a joint stock company whose shares are offered for public subscription during incorporation or which is listed on the capital market.
للوزارة والهيئة وضع الضوابط والإجراءات وتحديد الوثائق والموافقات اللازمة لتأسيس شركة مساهمة تطرح أسهمها للاكتتاب العام خلال مرحلة التأسيس أو تدرج في السوق المال
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.