Article 136 of the Saudi Companies Law

المادة 136 من نظام الشركات · الفرع الثاني: تخفيض رأس المال

The article requires equality between shareholders holding shares of the same type and class when a joint-stock company's capital is reduced.

Official text (Arabic)

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

يجب مراعاة المساواة بين المساهمين الحاملين أسهمًا من ذات النوع والفئة عند تخفيض رأس المال.

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 136 explained in plain English

This article states a short but important rule: when the capital of a joint-stock company is reduced, equality between shareholders holding shares of the same type and class must be observed.

What does this mean in practice?

Whatever the method of reduction, some shareholders may not bear its effect while others do not, if their shares are of the same type and class.
If the nominal value of the shares of a certain class is reduced, or a part of it is returned to their owners, this applies equally to all shares of that class.

The limits of the rule: equality is required between holders of shares of the same type and class. The text does not address comparison between different types or classes of shares, since each class may have different rights under the articles of association.

This rule applies alongside the other rules on reduction, including Article 135, which protects creditors, and Article 137, which requires, where the reduction is by buying shares, that shareholders be invited to offer their shares and that sale requests be reduced proportionally if they exceed the number sought. A shareholder who believes a reduction decision discriminated between them and other holders of the same class is advised to consult a lawyer specializing in companies.

Practical example

A joint-stock company in Riyadh decides to reduce its capital by returning part of the nominal value of its ordinary shares. The same part must be returned for every ordinary share to all holders of these shares, so large shareholders may not be returned a larger amount per share than small ones.

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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