Article 178 of the Saudi Companies Law
المادة 178 من نظام الشركات · الفصل الرابع: رأس المال والحصص
The article regulates a partner assigning their share to partners or others, and the other partners' or the company's right of redemption within 30 days, excluding inheritance, wills and court judgments.
Official text (Arabic)
This article has not been amended since the law was issued.
1- يجوز للشريك أن يتنازل عن حصته لأيّ من الشركاء وفقًا للشروط المنصوص عليها في عقد تأسيس الشركة.
2- يجب على الشريك إذا أراد التنازل عن حصته لغير أحد الشركاء في الشركة -بعوض أو دونه- أن يُبلغ باقي الشركاء عن طريق مدير الشركة باسم المتنازل له أو المشتري وبشروط التنازل أو البيع، وعلى المدير أن يبلغ باقي الشركاء بمجرد وصول الإبلاغ إليه. ويجوز لكل شريك أن يطلب استرداد تلك الحصة وسداد قيمتها أو قيام الشركة بشرائها خلال (ثلاثين) يومًا من تاريخ إبلاغ المدير بالثمن الذي يتفق عليه. وإذا طلب استرداد هذه الحصة أو الحصص أكثر من شريك قُسمت بينهم بنسبة حصة كل منهم في رأس المال. وفي حال الاختلاف على قيمة الحصة تُقدر قيمتها على نفقة طالب الاسترداد أو الشركة -بحسب الأحوال- من مقيم معتمد أو أكثر يعد تقريرًا يُبين فيه القيمة العادلة لحصة الشريك الراغب في التنازل. وإذا انقضت المدة المحددة لممارسة حق الاسترداد دون أن يطلب أي من الشركاء استرداد الحصة أو إذا لم يقم طالب الاسترداد بسداد قيمتها أو إذا لم تقم الشركة بشرائها خلال تلك المدة، كان لصاحبها الحق في التنازل عنها للغير.
3- يجوز أن يُنص في عقد تأسيس الشركة على إجراءات أخرى للإبلاغ بالتنازل عن الحصة أو على طريقة تقييم أخرى أو مدة أطول لممارسة حق الاسترداد وسداد القيمة أو لقيام الشركة بشرائها.
4- لا يسري حق الاسترداد المنصوص عليه في هذه المادة على انتقال ملكية الحصص بالإرث أو بالوصية أو بموجب حكم من الجهة القضائية المختصة.
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 178 explained in plain English
This article regulates assigning shares in a limited liability company, and distinguishes two cases:
Assignment to a partner: a partner may assign their share to any of the partners in accordance with the conditions set out in the memorandum of association.
Assignment to non-partners (for consideration or without):
- The partner must notify the other partners through the manager of the name of the assignee and the terms of the assignment, and the manager must notify them as soon as the notice reaches them.
- Each partner may request redemption of the share and pay its value, or have the company buy it, within 30 days of the manager being notified of the agreed price.
- If more than one partner requests redemption, the share is divided among them in proportion to each one's share of the capital.
- If there is disagreement on the value, one or more accredited valuers assess it at fair value, at the expense of the person requesting redemption or the company, as the case may be.
- If the period passes without a request, or the person requesting redemption does not pay the value, or the company does not buy it within the period, the partner may assign it to a third party.
The memorandum of association may provide for other notice procedures, another valuation method or a longer period. The right of redemption does not apply to the transfer of shares by inheritance, by will, or by a judgment of the competent judicial authority.
Article 177 provides for forming reserves, and Article 179 for issuing debt instruments and financing sukuk. Before selling your share or buying one, it is advisable to consult a lawyer who specializes in companies and commercial disputes.
Practical example
Mohammed wanted to sell his share in a company in Riyadh to an investor from outside it for SAR 200,000, so he notified the manager, who notified the other partners. Two partners requested redemption of the share within 30 days, so it is divided between them in proportion to each one's share of the capital. Had no one requested redemption and the company not bought it within the period, Mohammed could have sold it to the investor.
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 178 of the Saudi Companies Law
Can a partner sell their share to a person from outside the company?
Yes, after notifying the other partners through the manager, and once the redemption period has passed without anyone requesting redemption, paying the value, or the company buying the share.
How long is the partners' right of redemption?
30 days from the date the manager is notified of the agreed price, and the memorandum of association may provide for a longer period.
How is the value of the share determined in a disagreement?
One or more accredited valuers assess it in a report setting out the fair value, at the expense of the person requesting redemption or the company, as the case may be.
Does the right of redemption apply to an inherited share?
No. The right of redemption does not apply to the transfer of shares by inheritance, by will, or under a judgment of the competent judicial authority.
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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 156
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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
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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.
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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.