Article 116 of the Saudi Companies Law

المادة 116 من نظام الشركات · الفرع الأول: الأسهم

The article prevents the company from demanding that a shareholder pay more than they committed to when the share was issued, even if the articles of association provide otherwise.

Official text (Arabic)

This article has not been amended since the law was issued.

لا يجوز للشركة أن تطالب المساهم بدفع مبالغ تزيد على مقدار ما التزم به عند إصدار السهم ولو نص نظام الشركة الأساس على ذلك.

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 116 explained in plain English

This article sets a ceiling on a shareholder's financial obligation toward a joint stock company.

The rule: the company may not demand that a shareholder pay amounts exceeding what they committed to when the share was issued.

The force of the rule: this rule applies even if the company's articles of association provide otherwise. A provision in the articles of association requiring the shareholder to pay additional amounts beyond what they committed to does not entitle the company to make such a demand.

What does this mean in practice?

The shareholder must pay the value of the shares they committed to at issue, including any part that remains unpaid.
The company cannot ask them for additional payments, even if it needs financing or has suffered losses.

This article is consistent with Article 115, which requires the shareholder to pay the remaining value of the share by the specified dates and regulates what happens if they default; the obligation is only what they committed to at issue, and no more. A shareholder who receives a demand that they believe exceeds what they committed to should consult a lawyer who specializes in companies and commercial disputes.

Practical example

Yousef subscribed to 1,000 shares with a nominal value of SAR 10 per share in a joint stock company in Jeddah, and paid their full value. The company then suffered losses, and the board asked him to pay an additional SAR 5,000 based on a provision in the articles of association. The company may not make this demand, because it exceeds what Yousef committed to when the share was issued, and the provision in the articles of association does not change that.

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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