Article 161 of the Saudi Companies Law
المادة 161 من نظام الشركات · الفصل الثالث: إدارة الشركة ذات المسؤولية المحدودة
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.
Official text (Arabic)
This article has not been amended since the law was issued.
يحدد عقد تأسيس الشركة أو قرار الشركاء طريقة إدارة الشركة، والأغلبية اللازمة لصدور القرارات عند تعيين أكثر من مدير أو تكوين مجلس مديرين.
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 161 explained in plain English
This article leaves the partners free to organize the management of their company, providing that the company's memorandum of association or a resolution of the partners sets two things:
- How the company is managed, meaning how its business is run and how the managers carry out their work.
- The majority needed to pass decisions where more than one manager is appointed or a board of managers is formed.
The article does not set a specific percentage for this majority, but leaves it to the partners themselves to determine. It is therefore important for partners, when writing the memorandum of association, to state the management method and the majority clearly, to avoid a later dispute if the managers differ in opinion.
This article is linked to Article 160, which provides that the company is managed by one or more managers from among the partners or others, and that a board of managers may be formed by a resolution of the partners if there are several. It is also linked to Article 162, which makes the manager the company's representative before the courts, arbitration bodies and third parties, and provides that the company is bound by the manager's acts that fall within its purpose.
To choose and draft a suitable management model, it is possible to consult a lawyer who specializes in companies and commercial disputes.
Practical example
The partners in a trading company in Jeddah appointed three managers and formed them into a board of managers, and provided in their resolution that the board's decisions are passed with the approval of two of the three. This provision is valid, because the article leaves setting the majority to the memorandum of association or a resolution of the partners.
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 161 of the Saudi Companies Law
Who sets how a limited liability company is managed?
The company's memorandum of association or a resolution of the partners.
What majority is needed for the board of managers' decisions?
The article does not set a specific percentage, but leaves setting the majority to the memorandum of association or a resolution of the partners where more than one manager is appointed or a board of managers is formed.
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- Article 156
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- Article 157
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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
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.