Article 13 of the Saudi Companies Law
المادة 13 من نظام الشركات · الفصل الأول: تأسيس الشركة
Article 13 explains that a share may be cash or in kind, or work except in joint stock and simplified joint stock companies, and that capital consists of cash and in-kind shares alone.
Official text (Arabic)
This article has not been amended since the law was issued.
1- يجوز أن تكون حصة الشريك أو المساهم نقدية أو عينية، أو الاثنتين معًا.
2- فيما عدا شركتي المساهمة والمساهمة المبسطة، يجوز أن تكون حصة الشريك عملًا مقابل نسبة في الأرباح يحدد عقد تأسيس الشركة مقدارها، ولا يجوز أن تكون حصته ما له من سمعة أو نفوذ.
3- تكوِّن الحصص النقدية والحصص العينية وحدها رأس مال الشركة.
4- يجوز للمؤسسين أو الشركاء أو المساهمين تقديم حصص أو أسهم في رأس مال الشركة إلى شخص مقابل قيامه بعمل أو خدمات تعود على الشركة بالنفع وتحقق أهدافها، وذلك دون إخلال بأحكام النظام.
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 13 explained in plain English
This article governs what a partner or shareholder may contribute in return for joining the company:
- Cash or in-kind share: a share may be cash, or in-kind property such as real estate or equipment, or both.
- Share in the form of work: except in joint stock companies and simplified joint stock companies, a partner's share may be work, in return for a percentage of the profits whose amount is set by the formation contract.
- What cannot be a share: a partner's share may not be their reputation or influence.
- Components of capital: cash and in-kind shares alone make up the company's capital; a share in the form of work does not enter into the capital.
- Shares in return for services: the founders, partners, or shareholders may grant shares or stock in the capital to a person in return for work or services that benefit the company and achieve its objectives, without prejudice to the provisions of the Companies Law.
Article 14 then sets out the partner's obligations when contributing their share according to its type, such as guaranteeing an in-kind share and performing the work the working partner undertook. To judge which kind of share best suits a particular venture, it is advisable to consult a lawyer specialized in companies.
Practical example
Sultan, a software developer, agreed with two partners who contribute money to form a limited liability company in Riyadh, with his share being his work in return for a percentage of the profits set by the formation contract. This share is permitted, but it does not enter the company's capital, which consists of the two partners' cash shares.
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 13 of the Saudi Companies Law
Can a partner's share be their work only?
Yes, except in joint stock companies and simplified joint stock companies, in return for a percentage of the profits whose amount is set by the formation contract.
Does a share in the form of work enter the company's capital?
No. Cash and in-kind shares alone make up the company's capital.
Can a partner's share be their reputation or connections?
No. The article provides that a partner's share may not be their reputation or influence.
More articles on Company Formation
- Article 1
This article defines the key terms of the Companies Law, such as the Ministry, the Authority, the competent authority, relatives and day, and leaves the definition of other terms to the regulations.
1- يقصد بالكلمات والعبارات الآتية -أينما وردت في هذا النظام- المعاني الموضحة أمام كل منها، ما لم يقتضِ السياق غير ذلك: المملكة: المملكة العربية السعودية. النظام
- Article 2
Article 2 defines a company as a legal entity in which two or more persons contribute to a profit-seeking venture to share its profit and loss, and allows a company to be formed by one person or as a non-profit.
الشركة كيان قانوني يؤسس وفقًا لأحكام النظام بناء على عقد تأسيس أو نظام أساس يلتزم بمقتضاه شخصان أو أكثر بأن يساهم كل منهم في مشروع يستهدف الربح بتقديم حصة من ما
- Article 3
Article 3 provides that every company formed under the Companies Law is of Saudi nationality and must have its principal center in the Kingdom.
تعد الشركة التي تؤسس وفقًا لأحكام النظام سعودية الجنسية، ويجب أن يكون مركزها الرئيس في المملكة.
- Article 4
Article 4 sets out the five forms, one of which every company formed under the Companies Law must take.
تتخذ الشركة التي تؤسس وفقًا لأحكام النظام أحد الأشكال الآتية: أ- شركة التضامن. ب- شركة التوصية البسيطة. ج- شركة المساهمة. د- شركة المساهمة المبسطة. هـ- الشركة ذ
- Article 5
The article regulates a company's trade name: its language and sources, the former partner's consent to the use of his name, the indication of the company's form, and amendment of the name without affecting its rights and obligations.
1- يكون لكل شركة اسم تجاري باللغة العربية أو بلغة أخرى، ويجوز أن يكون الاسم مشتقًا من غرضها، أو اسمًا مميزًا، أو اسم واحد أو أكثر من الشركاء أو المساهمين فيها ا
- Article 6
Article 6 states who counts as a founder, regulates submitting the formation application to the commercial register, and gives founders the right to appeal a refusal to the Ministry and then to the competent judicial body.
1- يعد مؤسسًا كل من اشترك فعليًّا في تأسيس الشركة وساهم في رأس مالها بحصة نقدية أو عينية. 2- يقدم المؤسسون طلب تأسيس الشركة وقيدها إلى السجل التجاري، مرافقًا له
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.