Qanoon
Sign in

Article 131 of the Saudi Companies Law

المادة 131 من نظام الشركات · الفرع الأول: زيادة رأس المال

The article explains how new shares are distributed: first to holders of priority rights in proportion to their rights, then the remainder to those who requested more, and then what is left is offered to others.

Official text (Arabic)

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

توزع الأسهم الجديدة على حملة حقوق الأولوية الذين طلبوا الاكتتاب بنسبة ما لديهم من حقوق أولوية من إجمالي هذه الحقوق الناتجة عن زيادة رأس المال، بشرط ألا يتجاوز ما يحصلون عليه ما طلبوه من الأسهم الجديدة وبالمراعاة لنوع وفئة السهم الذي يملكونه، ويوزعُ الباقي من الأسهم الجديدة على أصحاب حقوق الأولوية الذين طلبوا أكثر من نصيبهم بنسبة ما لديهم من حقوق أولوية من إجمالي هذه الحقوق الناتجة عن زيادة رأس المال، بشرط ألا يتجاوز ما يحصلون عليه ما طلبوه من الأسهم الجديدة، ويطرحُ ما تبقى من الأسهم على الغير، ما لم تقرر الجمعية العامة غير العادية أو ينص نظام السوق المالية على غير 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 131 explained in plain English

After subscription in a capital increase closes, this article sets the order for distributing the new shares in three stages:

  1. First distribution: the shares are distributed to holders of priority rights who requested to subscribe, in proportion to each holder's priority rights relative to the total rights arising from the increase, provided that:
    • What each receives does not exceed what they requested of the new shares.
    • The type and class of share they hold is taken into account.
  2. Second distribution: the remainder is distributed to holders of priority rights who requested more than their portion, in proportion to their priority rights relative to the total of those rights, provided that what they receive does not exceed what they requested.
  3. Offering to others: whatever remains after that is offered to others.

The exception: this order applies unless the extraordinary general assembly decides otherwise, or the Capital Market Law provides otherwise.

The idea is that priority stays with the rights holders, and the shares are not made available to others until their requests are met. Holders of priority rights include someone who bought the right or to whom it was waived, since Article 130 allows a shareholder to sell the priority right or waive it, for consideration or free of charge, as the regulations provide. Anyone who objects to what was allocated to them can consult a lawyer specializing in companies and securities.

Practical example

A joint-stock company increased its capital in cash, and Fahd requested more new shares than his priority rights entitle him to. Fahd first received his portion in proportion to his rights. Because some rights holders did not subscribe, the remainder was distributed among those who requested more than their portion, Fahd among them, in proportion to their rights and without exceeding what they requested, and then what was left was offered to others.

Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.

Commercial & Corporate Law lawyers: ask a specialist about your case

Describe your situation briefly and we'll suggest a lawyer who specialises in this law

Commercial & Corporate Law lawyers

Lawyers who handle this kind of case

See all lawyers

Frequently asked questions about Article 131 of the Saudi Companies Law

How are new shares distributed to subscribers?

First to holders of priority rights who requested to subscribe, in proportion to their rights, without exceeding what each requested, and taking into account the type and class of share.

Do I get additional shares if I requested more than my portion?

The remaining shares are distributed to holders of priority rights who requested more than their portion, in proportion to their rights, provided they do not receive more than they requested.

What happens to shares that no rights holder subscribed for?

What remains is offered to others, unless the extraordinary general assembly decides otherwise or the Capital Market Law provides otherwise.

More articles on Shares and Capital Increase

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.