Article 14 of the Saudi Companies Law
المادة 14 من نظام الشركات · الفصل الأول: تأسيس الشركة
Article 14 sets out a partner's obligations when contributing a share: guaranteeing it under sale rules if it is a real right, rental rules if it is use of a personal right, and performing the work for the company if the share is work.
Official text (Arabic)
This article has not been amended since the law was issued.
1- إذا كانت حصة الشريك أو المساهم حق ملكية أو حق منفعة أو أي حق عيني آخر، كان مسؤولًا -وفقًا لأحكام عقد البيع- عن ضمان الحصة في حالة الهلاك وضمان التعرض أو الاستحقاق أو ظهور عيب أو نقص في الحصة، وإذا كانت حصته مجرد الانتفاع بحق شخصي على المال طُبّقت أحكام عقد الإيجار، وذلك ما لم يتفق على غير ذلك.
2- إذا كانت حصة الشريك عملًا، وجب أن يقوم بالعمل الذي تعهد به، ويكون كل كسب ينتج من هذا العمل من حق الشركة، ولا يجوز له أن يمارس هذا العمل لحسابه الخاص. ومع ذلك، لا يكون ملزمًا بأن يقدم إلى الشركة ما حصل عليه من حقوق على الملكية الفكرية الناتجة عن هذا العمل، إلا إذا اتفق على 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 14 explained in plain English
After Article 13 set out the types of shares, this article specifies what the partner or shareholder is bound to do according to the type of their share:
First: the in-kind share
- If the share is a right of ownership, a right of usufruct, or any other real right, the person contributing it is liable, in accordance with the provisions of the sale contract, for guaranteeing it in case of destruction, for guaranteeing against interference or eviction, and against the appearance of a defect or shortfall in it.
- If the share is merely the use of a personal right over property, the provisions of the lease contract apply.
- All of this applies unless otherwise agreed.
Second: the share in the form of work
- The partner must perform the work they undertook.
- Every gain arising from this work belongs to the company.
- They may not carry out this work for their own account.
- They are not required to give the company the intellectual property rights resulting from this work, unless agreed otherwise.
The practical meaning is that contributing a share is not a mere formal handover but an obligation of guarantee or performance. The article does not detail the provisions of the sale and lease contracts but refers to them. Because many of these provisions can be varied by agreement, it is advisable to regulate them expressly in the formation contract with the help of a lawyer specialized in companies.
Practical example
Nasser contributed a plot of land as an in-kind share in a company in Madinah, and it later emerged that its ownership was in dispute. Under this article, Nasser is liable for guaranteeing against eviction in accordance with the provisions of the sale contract, unless the partners agreed otherwise.
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 14 of the Saudi Companies Law
Does a partner guarantee the in-kind share they contributed?
Yes. If it is a right of ownership, usufruct, or another real right, they are liable under the provisions of the sale contract for guaranteeing against destruction, interference, eviction, defects, and shortfalls, unless otherwise agreed.
Can a working partner carry out the same work for their own account?
No. They must perform the work they undertook, every gain from it belongs to the company, and they may not carry it out for their own account.
Who owns the intellectual property rights resulting from a partner's work?
The partner is not required to give them to the company unless that is agreed.
More articles on Company Formation
- Article 1
This article defines the key terms of the Companies Law, such as the Ministry, the Authority, the competent authority, relatives and day, and leaves the definition of other terms to the regulations.
1- يقصد بالكلمات والعبارات الآتية -أينما وردت في هذا النظام- المعاني الموضحة أمام كل منها، ما لم يقتضِ السياق غير ذلك: المملكة: المملكة العربية السعودية. النظام
- Article 2
Article 2 defines a company as a legal entity in which two or more persons contribute to a profit-seeking venture to share its profit and loss, and allows a company to be formed by one person or as a non-profit.
الشركة كيان قانوني يؤسس وفقًا لأحكام النظام بناء على عقد تأسيس أو نظام أساس يلتزم بمقتضاه شخصان أو أكثر بأن يساهم كل منهم في مشروع يستهدف الربح بتقديم حصة من ما
- Article 3
Article 3 provides that every company formed under the Companies Law is of Saudi nationality and must have its principal center in the Kingdom.
تعد الشركة التي تؤسس وفقًا لأحكام النظام سعودية الجنسية، ويجب أن يكون مركزها الرئيس في المملكة.
- Article 4
Article 4 sets out the five forms, one of which every company formed under the Companies Law must take.
تتخذ الشركة التي تؤسس وفقًا لأحكام النظام أحد الأشكال الآتية: أ- شركة التضامن. ب- شركة التوصية البسيطة. ج- شركة المساهمة. د- شركة المساهمة المبسطة. هـ- الشركة ذ
- Article 5
The article regulates a company's trade name: its language and sources, the former partner's consent to the use of his name, the indication of the company's form, and amendment of the name without affecting its rights and obligations.
1- يكون لكل شركة اسم تجاري باللغة العربية أو بلغة أخرى، ويجوز أن يكون الاسم مشتقًا من غرضها، أو اسمًا مميزًا، أو اسم واحد أو أكثر من الشركاء أو المساهمين فيها ا
- Article 6
Article 6 states who counts as a founder, regulates submitting the formation application to the commercial register, and gives founders the right to appeal a refusal to the Ministry and then to the competent judicial body.
1- يعد مؤسسًا كل من اشترك فعليًّا في تأسيس الشركة وساهم في رأس مالها بحصة نقدية أو عينية. 2- يقدم المؤسسون طلب تأسيس الشركة وقيدها إلى السجل التجاري، مرافقًا له
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.