Article 16 of the Saudi Companies Law
المادة 16 من نظام الشركات · الفصل الثاني: مالية الشركة
Article 16 sets a company's financial year at twelve months fixed by the formation contract or bylaws, with the first financial year allowed to run between 6 and 18 months from registration.
Official text (Arabic)
This article has not been amended since the law was issued.
تكون السنة المالية للشركة (اثني عشر) شهرًا تُحدد في عقد تأسيسها أو نظامها الأساس. ومع ذلك، يجوز أن تحدد السنة المالية الأولى بما لا يقلّ عن (ستة) أشهر ولا يزيد على (ثمانية عشر) شهرًا بدءًا من تاريخ قيد الشركة لدى السجل التجاري.
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 16 explained in plain English
This article sets the rule on the length of a company's financial year, the period for which its financial statements are prepared.
- The rule: the financial year is 12 months.
- Who sets it: it is fixed in the formation contract or bylaws, so the partners may choose when it starts and ends.
- The first financial year: it may be set at no less than 6 months and no more than 18 months, starting from the date the company is registered with the commercial register.
The practical reason for the flexibility of the first year is that a company may be registered in the middle of a year, so the partners can align its financial year with the date they choose without the first year being too short or too long.
This fixing has a direct effect under Article 17, which requires financial statements to be prepared at the end of each financial year and filed within 6 months of its end. Fixing the end of the financial year therefore determines when the statements must be prepared and filed.
Practical example
Louay's company was registered with the commercial register in the middle of the year, and the partners want its financial year to end at the end of the following year. They may do so as long as the first financial year is no less than 6 months and no more than 18 months from the date of registration; each year after that is then 12 months.
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 16 of the Saudi Companies Law
How long is a company's financial year?
Twelve months, fixed in the formation contract or bylaws.
Can the first financial year be longer than a year?
Yes. The first financial year may be set at no less than 6 months and no more than 18 months from the date of registration with the commercial register.
When does a company's first financial year start?
It starts from the date the company is registered with the commercial register.
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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.