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Article 132 of the Saudi Companies Law

المادة 132 من نظام الشركات · الفرع الأول: زيادة رأس المال

If losses reach half of the issued capital, the board of a joint-stock company must disclose this within 60 days and call the extraordinary general assembly within 180 days to decide whether to continue or dissolve.

Official text (Arabic)

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

إذا بلغت خسائر شركة المساهمة (نصف) رأس المال المصدر، وجب على مجلس الإدارة الإفصاح عن ذلك وعما توصل إليه من توصيات بشأن تلك الخسائر خلال (ستين) يومًا من تاريخ علمه ببلوغها هذا المقدار، ودعوة الجمعية العامة غير العادية إلى الاجتماع خلال (مائة وثمانين) يومًا من تاريخ العلم بذلك للنظر في استمرار الشركة مع اتخاذ أي من الإجراءات اللازمة لمعالجة تلك الخسائر، أو حلّها.

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 132 explained in plain English

This article sets an early warning when a joint-stock company suffers major losses, so that the situation does not continue without the shareholders' knowledge and decision.

When does the rule apply? When the company's losses reach half of the issued capital.

What must the board of directors do?

  1. Disclose that the losses have reached this level, and the recommendations it has reached about them, within 60 days of the date it learns that they have.
  2. Call the extraordinary general assembly to meet within 180 days of the date it learns of this.

What does the assembly decide? It considers one of two things:

  • the continuation of the company, with whatever measures are needed to address the losses, or
  • the dissolution of the company.

Both periods run from the date the board learns that the losses have reached half, not from the end of the financial year. The article does not itself specify the remedial measures but leaves the choice to the assembly. Among the ways of reducing capital, Article 133 mentions reducing the nominal value of the share by cancelling a part of it equal to the loss the company has suffered. A shareholder or board member facing this situation can consult a lawyer specializing in companies.

Practical example

A joint-stock company in Riyadh has issued capital of SAR 20 million, and its board learns from the accounts that losses have reached SAR 10 million. The board must disclose this, with its recommendations, within 60 days of learning of it, and must call the extraordinary general assembly to meet within 180 days to decide whether the company continues while the losses are addressed, or is dissolved.

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 132 of the Saudi Companies Law

What happens if a joint-stock company loses half of its capital?

The board must disclose this, with its recommendations, within 60 days of learning of it, and call the extraordinary general assembly within 180 days to consider continuing or dissolving the company.

Is the company dissolved automatically if its losses reach half?

The article does not provide for automatic dissolution. The extraordinary general assembly considers continuing the company while the losses are addressed, or dissolving it.

From when are the 60 and 180 days counted?

From the date the board of directors learns that the losses have reached half of the issued capital.

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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.