Article 134 of the Saudi Companies Law
المادة 134 من نظام الشركات · الفرع الثاني: تخفيض رأس المال
The article allows the extraordinary general assembly to reduce capital if it exceeds the company's needs or the company has suffered losses, after a statement from the board and a report from the auditor.
Official text (Arabic)
This article has not been amended since the law was issued.
للجمعية العامة غير العادية أن تقرر تخفيض رأس المال إذا زاد على حاجة الشركة أو إذا مُنيت الشركة بخسائر. ويجوز في الحالة الأخيرة وحدها تخفيض رأس المال إلى ما دون الحد الوارد في المادة (التاسعة والخمسين) من النظام. ولا يصدر قرار التخفيض إلا بعد تلاوة بيان في الجمعية العامة يعده مجلس الإدارة عن الأسباب الموجبة للتخفيض والتزامات الشركة وأثر التخفيض في الوفاء بها، ويرفق بهذا البيان تقرير من مراجع حسابات الشركة. ويجوز الاكتفاء بعرض البيان المذكور على المساهمين في الحالات التي يصدر فيها قرار الجمعية العامة بالتمرير.
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 134 explained in plain English
This article sets out when a joint-stock company's capital may be reduced, who decides, and what precedes the decision.
Who decides? The extraordinary general assembly.
In which two cases?
- If the capital exceeds the company's needs.
- If the company has suffered losses.
Going below the minimum: in the case of losses alone, capital may be reduced below the limit stated in Article 59 of the law. A reduction because capital exceeds needs is not covered by this exception. The article does not state the amount of that limit itself.
What precedes the decision:
- The board of directors prepares a statement on: the reasons justifying the reduction, the company's obligations, and the effect of the reduction on meeting them.
- A report from the company's auditor is attached to the statement.
- The statement is read out at the general assembly, and the reduction decision is issued only after that.
Decision by circulation: if the assembly's decision is issued by circulation, it is enough to present the statement to the shareholders instead of reading it out.
Article 133 lists the methods of reduction, and Article 135 adds procedures to protect creditors where the reduction is because capital exceeds the company's needs. Anyone considering a reduction decision for their company is advised to consult a lawyer specializing in companies.
Practical example
A joint-stock company in Jeddah has suffered large losses. Its board prepares a statement on the reasons for the reduction, the company's obligations and the effect of the reduction on meeting them, and attaches the auditor's report. The statement is read at the extraordinary general assembly meeting, and the assembly then decides to reduce the capital. Because the reason is losses, the capital may fall below the limit referred to in Article 59.
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 134 of the Saudi Companies Law
When may a joint-stock company's capital be reduced?
If the capital exceeds the company's needs or the company has suffered losses, by a decision of the extraordinary general assembly.
Can capital be reduced below the minimum?
This is allowed in the case of losses alone, to below the limit stated in Article 59 of the law.
What is required before the reduction decision is issued?
A statement prepared by the board of directors on the reasons for the reduction, the company's obligations and its effect on meeting them is read out, with the auditor's report attached; if the decision is by circulation, it is enough to present the statement to the shareholders.
Articles this article refers to
More articles on Shares and Capital Increase
- Article 25
The article states when ownership of shares and stock transfers: by commercial register entry for partnership and limited liability shares, by shareholders' register entry for unlisted joint stock and simplified companies, and under the Capital Market Law for listed ones.
1- تنتقل ملكية الحصص في شركة التضامن وشركة التوصية البسيطة والشركة ذات المسؤولية المحدودة بالقيد لدى السجل التجاري، ولا يُعتد بنقل ملكية الحصة في مواجهة الشركة
- Article 34
تجيز المادة للدائن الشخصي للشريك أو المساهم طلب بيع ما يلزم من حصصه أو أسهمه لاستيفاء حقه، مع حق الشركاء في الاسترداد وأولوية المساهمين في حالات محددة.
مع مراعاة أحكام نظام ضمان الحقوق بالأموال المنقولة، والأنظمة الأخرى ذات العلاقة، للدائن الشخصي للشريك أو المساهم -فضلًا عن الحق المشار إليه في المادة (الثالثة و
- Article 59
توجب المادة ألا يقل رأس مال شركة المساهمة المصدر عن خمسمائة ألف ريال، وألا يقل المدفوع منه عند التأسيس عن الربع.
يجب ألا يقلّ رأس مال شركة المساهمة المصدر عن (خمسمائة ألف) ريال، ويجب ألا يقلّ المدفوع منه عند التأسيس عن (الربع).
- Article 60
تقرر المادة أن لشركة المساهمة رأس مال مصدرًا يمثل الأسهم المكتتب بها، وتجيز تحديد رأس مال مصرح به يزيد مجلس الإدارة المصدر في حدوده بعد دفعه بالكامل.
1- يكون لشركة المساهمة رأس مال مصدر يمثل الأسهم المكتتب بها، ويجوز أن يحدد نظام الشركة الأساس رأس مال مصرحًا به. 2- يجوز بقرار من مجلس إدارة الشركة زيادة رأس ال
- Article 62
The article requires the founders, if they do not subscribe to all the company's shares themselves during incorporation, to offer the remaining shares for subscription in accordance with the Capital Market Law.
إذا لم يقصر المؤسسون خلال مرحلة التأسيس الاكتتاب بجميع الأسهم على أنفسهم، وجب عليهم طرح الأسهم التي لم يكتتبوا بها للاكتتاب وفقًا لنظام السوق المالية.
- Article 63
The article gives the Ministry and the Authority the power to set the controls, procedures, documents and approvals for incorporating a joint stock company whose shares are offered for public subscription during incorporation or which is listed on the capital market.
للوزارة والهيئة وضع الضوابط والإجراءات وتحديد الوثائق والموافقات اللازمة لتأسيس شركة مساهمة تطرح أسهمها للاكتتاب العام خلال مرحلة التأسيس أو تدرج في السوق المال
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.