Article 125 of the Saudi Companies Law

المادة 125 من نظام الشركات · الفصل الخامس: مالية شركة المساهمة

The article gives the general assembly the power to set the percentage of profits distributed after deducting reserves, and provides that profits belong to shareholders registered at the end of the entitlement day.

Official text (Arabic)

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

1- تحدد الجمعية العامة النسبة التي يجب توزيعها على المساهمين من الأرباح الصافية بعد خصم الاحتياطيات، إن وجدت.

2- يستحق المساهم حصته في الأرباح وفقًا لقرار الجمعية العامة الصادر في هذا الشأن، ويبين القرار تاريخ الاستحقاق وتاريخ التوزيع. وتكون أحقية الأرباح لمالكي الأسهم المسجلين في سجلات المساهمين في نهاية اليوم المحدد للاستحقاق. وتحدد اللوائح الحد الأقصى للمدة التي يجب على مجلس الإدارة أن ينفذ خلالها قرار الجمعية العامة في شأن توزيع الأرباح على المساهمين.

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 125 explained in plain English

This article answers a question every shareholder cares about: who decides on profit distribution, and when am I entitled to my share?

First: setting the distribution percentage

The general assembly determines the percentage to be distributed to shareholders from net profits after deducting reserves, if any. Reserves, including those whose use is governed by Article 124, are deducted first, and then what the assembly decides is distributed.

Second: the shareholder's entitlement

A shareholder is entitled to their share under the general assembly's decision issued on the matter.
The decision must state the entitlement date and the distribution date.
The profits belong to the owners of shares registered in the shareholders' records at the end of the day set for entitlement; what counts is registration on that day.

Third: the time limit for implementation

The regulations set the maximum period within which the board of directors must implement the general assembly's decision to distribute profits. The article itself does not state this period.

It follows that a company simply making profits does not mean a shareholder is automatically entitled to them; a decision of the general assembly is required. Anyone with a dispute over undistributed profits should consult a lawyer specializing in companies and commercial cases.

Practical example

The general assembly of a joint-stock company in Riyadh decided to distribute part of the year's net profits after deducting reserves, and its decision set an entitlement date and a distribution date. Sarah sold her shares, and the transfer of ownership was recorded in the shareholders' register before the entitlement day, so the profits go to the person who bought them, because that person was the registered owner at the end of that day.

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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