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Article 141 of the Saudi Companies Law

المادة 141 من نظام الشركات · الفصل الثاني: تأسيس شركة المساهمة المبسطة

The article exempts in-kind contributions in a simplified joint-stock company from accredited valuation if they do not exceed half of the capital, requires it if they do, and makes founders or shareholders liable if valuation is not done or is departed from.

Official text (Arabic)

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

1- إذا قدمت حصص عينية عند تأسيس الشركة أو عند زيادة رأس مالها لا يتجاوز مجموع قيمتها (نصف) رأس مال الشركة، فلا يجب تقييمها من مقيم معتمد، ما لم يتفق المؤسسون أو المساهمون على غير ذلك.

2- إذا تجاوزت قيمة الحصص العينية المقدمة عند تأسيس الشركة أو زيادة رأس مالها (نصف) رأس مالها، وجب تقييمها من مقيم معتمد أو أكثر، وأن يعد المقيم تقريرًا يُبين فيه القيمة العادلة لهذه الحصص، ويعرض ذلك التقرير على المؤسسين أو المساهمين، للمداولة فيه، ولا يكون لمقدمي الحصص العينية المشاركة في التصويت على القرار بشأن التقرير المعد عنها، فإن قرر المؤسسون أو المساهمون تخفيض المقابل المحدد للحصص العينية، وجب الحصول على موافقة مقدمي تلك الحصص على ذلك التخفيض.

3- يشترط ألا تتجاوز المدة ما بين إصدار تقرير المقيم المعتمد بتقدير القيمة العادلة للحصص العينية، وإصدار الأسهم مقابل تلك الحصص، المدة التي تحددها اللوائح.

4- إذا لم تقيم الحصص العينية من مقيم معتمد وفقًا لحكم هذه المادة أو إذا قُيمت بغير تقدير المقيم المعتمد المعين، يكون المؤسسون أو المساهمون مسؤولين شخصيًّا في جميع أموالهم في مواجهة الغير عن عدالة تقدير هذه الحصص وأداء الفرق نقدًا إلى الشركة. ولا تسمع الدعوى في هذه الحالة بعد انقضاء (خمس) سنوات من تاريخ قيد الشركة لدى السجل التجاري أو زيادة رأس مالها بحسب الأحوال.

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 141 explained in plain English

An in-kind contribution is what a partner provides instead of cash, such as real estate, equipment or a trademark. This article governs its valuation in a simplified joint-stock company on formation or on a capital increase:

1- If their total value does not exceed half of the capital

They need not be valued by an accredited valuer, unless the founders or shareholders agree otherwise.

2- If their value exceeds half of the capital

  • They must be valued by one or more accredited valuers who prepare a report of the fair value.
  • The report is presented to the founders or shareholders for deliberation, and those who contributed the in-kind shares do not take part in the vote on the decision about the report prepared on their contributions.
  • If they decide to reduce the consideration set for the contributions, the approval of those who contributed them must be obtained.

3- Validity period of the valuation

The period between the issue of the valuer's report and the issue of shares in exchange for the contributions must not exceed the period set by the regulations; the article does not state it.

4- Liability

If the contributions are not valued by an accredited valuer in accordance with this article, or are valued differently from the assessment of the appointed accredited valuer, the founders or shareholders are personally liable with all their assets to third parties for the fairness of the valuation and for paying the difference in cash to the company. No claim is heard after 5 years from the date the company is registered in the commercial register or its capital is increased, as the case may be.

This article is linked to Article 140, which requires that the formation application be accompanied by a statement or report from an accredited valuer on the fair value of in-kind contributions, if any, with a declaration by the other founders that they approve the consideration. To check that contributions are properly valued, it is advisable to consult a lawyer specializing in companies.

Practical example

Majed and three friends formed a simplified joint-stock company in Riyadh, and Majed contributed a warehouse as an in-kind contribution worth more than half of the capital. The warehouse therefore had to be valued by an accredited valuer, and the report put to the partners for a vote without Majed taking part. Had they ignored the valuation and overstated the warehouse's value, they would have been personally liable with their assets to third parties for the fairness of the valuation and for paying the difference in cash to the company.

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 141 of the Saudi Companies Law

Must an in-kind contribution in a simplified company be valued by an accredited valuer?

Not if the total value of in-kind contributions does not exceed half of the capital, unless the founders or shareholders agree otherwise; it must be if they exceed half.

Does the person who contributes the in-kind share vote on the valuation report?

No. Those who contribute in-kind shares do not take part in the vote on the decision about the report prepared on them.

What is the liability if in-kind contributions are not properly valued?

The founders or shareholders are personally liable with all their assets to third parties for the fairness of the valuation and for paying the difference in cash to the company.

When does the liability claim lapse for the valuation of in-kind contributions?

No claim is heard after 5 years from the date the company is registered in the commercial register or its capital is increased, as the case may be.

More articles on Simplified Joint Stock Company

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.