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Article 135 of the Saudi Companies Law

المادة 135 من نظام الشركات · الفرع الثاني: تخفيض رأس المال

When capital is reduced because it exceeds the company's needs, creditors must be invited to object 45 days before the assembly, and the company must pay an objecting creditor's due debt or secure a debt not yet due.

Official text (Arabic)

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

1- إذا كان تخفيض رأس المال نتيجة زيادته على حاجة الشركة، وجبت دعوة الدائنين إلى إبداء اعتراضاتهم -إن وجدت- على التخفيض قبل (خمسة وأربعين) يومًا على الأقل من التاريخ المحدد لعقد اجتماع الجمعية العامة غير العادية لاتخاذ قرار التخفيض، على أن يرفق بالدعوة بيان يوضح مقدار رأس المال قبل التخفيض وبعده، وموعد عقد الاجتماع وتاريخ نفاذ التخفيض، فإن اعترض على التخفيض أي من الدائنين وقدم إلى الشركة مستنداته في الموعد المذكور، وجب على الشركة أن تؤدي إليه دينه إذا كان حالًّا أو أن تقدم إليه ضمانًا كافيًا للوفاء به إذا كان آجلًا. وللدائن الذي أخطر الشركة باعتراضه على التخفيض ولم يتم الوفاء بدينه إذا كان حالًّا، أو تقديم ضمان كافٍ للوفاء به إذا كان آجلًا، أن يتقدم إلى الجهة القضائية المختصة قبل التاريخ المحدد لعقد الجمعية العامة غير العادية لاتخاذ قرار التخفيض، ويكون للجهة القضائية المختصة في هذه الحالة أن تأمر بالوفاء بالدين أو بتقديم ضمان كافٍ أو تأجيل عقد اجتماع الجمعية العامة غير العادية بحسب الأحوال.

2- لا يحتج بالتخفيض قِبلَ الدائن الذي قدم طلبه في الموعد المنصوص عليه في الفقرة (1) من هذه المادة إلا إذا استوفى ما حلّ من دينه أو حصل على الضمان الكافي للوفاء بما لم يحلّ منه.

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 135 explained in plain English

This article protects the creditors of a joint-stock company, because a capital reduction may reduce the funds on which they rely to collect their debts. It applies where the reduction is because the capital exceeds the company's needs.

1- Inviting creditors

  • Creditors are invited to state their objections at least 45 days before the date set for the extraordinary general assembly meeting.
  • The invitation is accompanied by a statement showing: the capital before and after the reduction, the date of the meeting, and the date the reduction takes effect.

2- If a creditor objects and submits their documents to the company by that date, the company must:

  • pay the debt if it is due, or
  • provide adequate security if it is not yet due.

3- Going to court

If the creditor notifies the company of their objection and the company does not pay them or provide security, they may apply to the competent judicial authority before the date set for the assembly. That authority may order payment, adequate security, or postponement of the assembly meeting, as the case requires.

4- Effect of the reduction on an objecting creditor

The reduction cannot be invoked against a creditor who submitted their request on time unless they have received what has fallen due of their debt or obtained adequate security for what has not.

Article 134 gives the reduction decision to the extraordinary general assembly after a statement from the board on the company's obligations. A creditor who wants to protect their right can consult a lawyer specializing in commercial cases and companies.

Practical example

A supply company in Riyadh is owed an amount by a joint-stock company that falls due in six months, and receives an invitation to object to a reduction of the debtor company's capital because it exceeds its needs. The supply company submits its objection and documents on time, so the debtor company must provide it with adequate security because the debt is not yet due. If it does not, the supply company may apply to the competent judicial authority before the assembly date.

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 135 of the Saudi Companies Law

Does a creditor have the right to object to a company's capital reduction?

Yes. If the reduction is because capital exceeds the company's needs, creditors are invited to object at least 45 days before the date of the extraordinary general assembly.

What must the company do if a creditor objects?

If the creditor submits their documents on time, the company must pay their debt if it is due, or provide adequate security if it is not yet due.

What if the company does not pay the objecting creditor?

The creditor may apply to the competent judicial authority before the assembly date, which may order payment, security or postponement of the meeting, as the case requires.

Does the reduction apply to the objecting creditor?

It cannot be invoked against them unless they have received what has fallen due of their debt or obtained adequate security for what has not.

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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.