Article 156 of the Saudi Companies Law
المادة 156 من نظام الشركات · الفصل الأول: أحكام عامة
The article defines the limited liability company as a company with a separate financial liability formed by one or more persons, in which a partner is liable for its debts only to the extent of their share in the capital.
Official text (Arabic)
This article has not been amended since the law was issued.
الشركة ذات المسؤولية المحدودة: هي شركة يؤسسها شخص واحد أو أكثر من ذوي الصفة الطبيعية أو الاعتبارية، وتعد ذمتها مستقلة عن الذمة المالية لكل شريك فيها أو المالك لها. وتكون الشركة وحدها مسؤولة عن الديون والالتزامات المترتبة عليها أو الناشئة عن نشاطها، ولا يكون المالك لها ولا الشريك فيها مسؤولًا عن هذه الديون والالتزامات إلا بقدر حصته في 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 156 explained in plain English
This article sets out the definition of the limited liability company, one of the most common forms of company among business owners. The definition rests on several elements:
- Founders: it is formed by one or more persons, whether natural persons (individuals) or legal persons (such as other companies).
- Separate financial liability: the company's financial liability is separate from the financial liability of each partner in it or of its owner.
- Liability for debts: the company alone is liable for the debts and obligations incumbent on it or arising from its activity.
- The limit of a partner's liability: the owner or partner is liable for these debts and obligations only to the extent of their share in the capital.
This is the meaning of "limited liability": a partner knows in advance that the most they can lose because of the company's debts is their share in its capital, according to the text of this article.
Article 157 sets out the provisions specific to a company formed by one person or all of whose shares come to one person, including that this person has the powers of the manager and of the general assembly of partners and that the company has articles of association. To assess a particular case, it is possible to consult a lawyer who specializes in companies and commercial disputes.
Practical example
Fahd formed a limited liability company in Riyadh with a share of SAR 50,000, and debts to suppliers then built up against the company. Under this article the company alone is liable for its debts, and Fahd is liable for them only to the extent of his share in the capital.
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 156 of the Saudi Companies Law
Does a partner bear the debts of a limited liability company from their own money?
The article provides that the company alone is liable for its debts, and the partner or owner is liable for them only to the extent of their share in the capital.
Can one person form a limited liability company?
Yes. The article provides that it is a company formed by one or more persons.
Can a company be a partner in a limited liability company?
Yes. The article allows the founders to be natural or legal persons.
More articles on Limited Liability Company
- 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 157
The article regulates a limited liability company owned by one person: their powers, documenting their decisions, appointing a manager, and the company having articles of association in place of a memorandum of association.
1- في حال تأسيس الشركة ذات المسؤولية المحدودة من شخص واحد، أو إذا آلت جميع حصصها إلى شخص واحد، يترتب ما يأتي: أ- أن تكون لهذا الشخص صلاحيات وسلطات المدير ومجلس
- Article 158
The article sets out the details that must be stated in the memorandum of association of a limited liability company, and the documents attached to it when applying for formation.
1- يجب أن يشتمل عقد تأسيس الشركة ذات المسؤولية المحدودة بصفة خاصة على البيانات الآتية: أ- أسماء الشركاء، وبياناتهم. ب- اسم الشركة. ج- المركز الرئيس للشركة. د- غ
- Article 159
For valuing in-kind shares in a limited liability company, the article refers to the provisions of Article 141 of the Companies Law.
يتبع في تقييم الحصص العينية الأحكام المنصوص عليها في المادة (الحادية والأربعين بعد المائة) من النظام.
- Article 160
The article provides that a limited liability company is managed by one or more managers appointed by the partners in the memorandum of association or a separate contract, and that a board of managers may be formed.
يدير الشركة مدير أو أكثر من الشركاء أو من غيرهم، ويعين الشركاء المدير أو المديرين في عقد تأسيس الشركة أو في عقد مستقل، لمدة محددة أو غير محددة. ويجوز بقرار من ا
- Article 161
The article provides that the memorandum of association or a partners' resolution sets how the company is managed and the majority needed for decisions where there are several managers or a board of managers.
يحدد عقد تأسيس الشركة أو قرار الشركاء طريقة إدارة الشركة، والأغلبية اللازمة لصدور القرارات عند تعيين أكثر من مدير أو تكوين مجلس مديرين.
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.