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Article 166 of the Saudi Companies Law

المادة 166 من نظام الشركات · الفصل الثالث: إدارة الشركة ذات المسؤولية المحدودة

The article regulates how partners' decisions are made, in the general assembly or by circulation, how they are sent, and requires approval of more than half the capital unless the contract requires a greater majority.

Official text (Arabic)

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

1- تصدر قرارات الشركاء في الجمعية العامة. ومع ذلك، يجوز إصدار قرارات الشركاء بعرضها عليهم بالتمرير دون الحاجة إلى انعقاد الجمعية العامة. وفي هذه الحالة، يرسل مدير الشركة إلى كل شريك القرارات المقترحة والوثائق ذات العلاقة بها ليصوت الشريك عليها كتابة.

2- ما لم ينص عقد تأسيس الشركة على وسيلة إبلاغ أخرى، يجوز أن تُرسل القرارات المقترحة وما يتعلق بها من وثائق بأي من الوسائل الآتية:

أ- إرسالها إلى الشركاء بخطابات مسجلة.

ب- التسليم شخصيًّا إلى الشركاء أو من ينوب عنهم نظامًا.

ج- إرسالها بالبريد الإلكتروني أو بأي من وسائل التقنية الحديثة.

3- في جميع الأحوال لا تكون القرارات صحيحة إلا إذا وافق عليها شريك أو أكثر يمثلون أكثر من (نصف) رأس المال على الأقل، ما لم ينص عقد تأسيس الشركة على أغلبية أكبر.

4- إذا لم تتوافر في المداولة أو في المشاورة الأولى الأغلبية المنصوص عليها في الفقرة (3) من هذه المادة، وجبت دعوة الشركاء إلى الاجتماع، وتصدر القرارات في هذه الحالة بموافقة أغلبية الحصص الممثلة فيه أيًّا كانت النسبة التي تمثلها في رأس المال، ما لم ينص عقد تأسيس الشركة على غير ذلك.

5- يجوز أن يحدد عقد تأسيس الشركة أي طريقة أخرى للدعوة إلى الاجتماع أو الإبلاغ بالقرارات.

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 166 explained in plain English

This article sets out how partners' decisions are made in a limited liability company:

  • The rule and circulation: decisions are made in the general assembly, and may be made by circulation without it meeting, in which case the manager sends each partner the proposed decisions and their documents to vote on in writing.
  • Means of sending: unless the memorandum of association provides another means, decisions are sent by registered letters, by personal delivery to the partner or their lawful representative, or by email or modern technological means.
  • The majority: in all cases decisions are valid only with the approval of one or more partners representing more than half of the capital, unless the memorandum of association requires a greater majority.
  • If the majority is not obtained: if this majority is not obtained in the first deliberation or consultation, the partners must be called to a meeting, and decisions are then made with the approval of the majority of the shares represented at it, whatever their percentage of the capital, unless the memorandum of association provides otherwise.
  • The memorandum of association may set any other method for calling the meeting or notifying decisions.

The article is linked to Article 165, which requires partners' decisions by circulation to be recorded in minutes in a special register. Article 167 provides that the manager prepares the financial statements and a report on activity and provides them to the partners at least 21 days before the annual meeting. To understand the effect of these majorities on a particular decision, it is possible to consult a lawyer who specializes in companies and commercial disputes.

Practical example

The manager of a company in Riyadh sent the four partners a proposed decision by email to vote on in writing. Two partners who together own only 40% of the capital approved, so a majority of more than half was not reached. In this case the partners must be called to a meeting, and the decision is made there by the majority of the shares represented, unless the memorandum of association provides 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 166 of the Saudi Companies Law

Can partners' decisions be made without a meeting?

Yes. They may be made by circulation, with the manager sending the proposed decisions and their documents to each partner to vote on in writing.

What majority is needed for partners' decisions to be valid?

The approval of one or more partners representing more than half of the capital, unless the memorandum of association requires a greater majority.

What happens if the majority is not reached in the first vote?

The partners must be called to a meeting, and decisions are made with the approval of the majority of the shares represented, whatever their percentage, unless the memorandum of association provides otherwise.

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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.