Article 175 of the Saudi Companies Law

المادة 175 من نظام الشركات · الفصل الرابع: رأس المال والحصص

The article provides that shares carry equal rights in net profits and liquidation surplus unless the memorandum of association says otherwise, and that the general assembly sets the distribution percentage and the due date.

Official text (Arabic)

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

1- ترتب الحصص حقوقًا متساوية في الأرباح الصافية وفي فائض التصفية، ما لم ينص عقد تأسيس الشركة على غير ذلك.

2- تحدد الجمعية العامة النسبة التي يجب توزيعها على الشركاء من الأرباح الصافية بعد خصم الاحتياطيات، إن وجدت.

3- يستحق الشريك حصته في الأرباح وفقًا لقرار الجمعية العامة أو الشركاء الصادر في هذا الشأن، ويبين القرار تاريخ الاستحقاق وتاريخ التوزيع.

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 175 explained in plain English

This article regulates partners' rights to profits in a limited liability company:

Equality between shares: shares carry equal rights in net profits and in liquidation surplus, unless the memorandum of association provides otherwise. The rule is that each share receives an equal portion to the others, and the memorandum of association may provide differently.
Distribution percentage: the general assembly sets the percentage of net profits, after deducting reserves if any, that is distributed to the partners. Not all of the profit is necessarily distributed.
Entitlement: a partner is entitled to their share of profits under the decision of the general assembly or the partners made on this matter, and the decision must state the due date and the distribution date.

This means that a partner's right to receive profits depends on a decision being made to distribute them, and that the two dates stated in the decision are the reference for when they fall due and are paid.

Article 174 provides for dividing the capital into shares of equal value. Article 176 regulates reducing capital if it exceeds the company's needs or if it suffers losses. To understand your entitlement in a particular case or a dispute over distribution, it is possible to consult a lawyer who specializes in companies and commercial disputes.

Practical example

A company in Jeddah made net profits of SAR 500,000, and the general assembly decided to distribute 60% of them after deducting the reserve, and stated the due date and distribution date in the decision. Because the memorandum of association does not provide otherwise, each share receives an equal portion of the amount distributed.

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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