Article 18 of the Saudi Companies Law
المادة 18 من نظام الشركات · الفصل الثاني: مالية الشركة
Article 18 requires a company to have a licensed auditor appointed by the partners, general assembly, or shareholders, and regulates the auditor's removal, with notice to the competent authority within 5 days, and resignation by reasoned written notice.
Official text (Arabic)
This article has not been amended since the law was issued.
1- يكون للشركة مراجع حسابات (أو أكثر) من المراجعين المرخص لهم في المملكة يعينه ويحدد أتعابه ومدة عمله ونطاقه الشركاء أو الجمعية العامة أو المساهمون بحسب الأحوال، ويجوز إعادة تعيينه. وتحدد اللوائح الحد الأعلى لمدة عمل مراجع الحسابات الفرد أو الشركة والشريك فيها المشرف على المراجعة.
2- يجوز للشركاء أو الجمعية العامة أو المساهمون -بحسب الأحوال- عزل مراجع الحسابات، وذلك دون إخلال بحقه في التعويض عن الضرر الذي يلحق به إذا كان له مقتض. ويجب على المدير أو رئيس مجلس الإدارة إبلاغ الجهة المختصة بقرار العزل وأسبابه، وذلك خلال مدة لا تتجاوز (خمسة) أيام من تاريخ صدور القرار.
3- لمراجع الحسابات أن يعتزل مهمته بموجب إبلاغ مكتوب يقدمه إلى الشركة، وتنتهي مهمته من تاريخ تقديمه أو في تاريخ لاحق يحدده في الإبلاغ، وذلك دون إخلال بحق الشركة في التعويض عن الضرر الذي يلحق بها إذا كان له مقتض. ويلتزم مراجع الحسابات المعتزل بأن يقدم إلى الشركة والجهة المختصة -عند تقديم الإبلاغ- بيانًا بأسباب اعتزاله، ويجب على مدير الشركة أو مجلس إدارتها دعوة الشركاء أو المساهمين إلى الاجتماع أو الجمعية العامة إلى الانعقاد -بحسب الأحوال- للنظر في أسباب الاعتزال وتعيين مراجع حسابات آخر.
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 18 explained in plain English
This article governs the auditor's term of work from appointment to the end of the assignment:
1- Appointment: the company has one or more auditors from those licensed in the Kingdom. The partners, general assembly, or shareholders, as the case may be, appoint the auditor and determine their fees, term of work, and scope, and the auditor may be reappointed. The regulations set the maximum term of work for an individual auditor, or for an audit firm and the partner supervising the audit in it.
2- Removal: the body that appointed the auditor may remove them, without prejudice to their right to compensation for harm where warranted. The manager or the chair of the board of directors must notify the competent authority of the removal decision and its reasons within no more than 5 days of its issuance.
3- Resignation: the auditor may resign from the assignment by written notice submitted to the company, and the assignment ends on the date of submission or on a later date they specify. The company retains the right to compensation for harm where warranted. A resigning auditor must provide the company and the competent authority with a statement of the reasons for resigning, and the manager or board of directors must call the partners, shareholders, or general assembly to consider the reasons for resignation and appoint another auditor.
This requirement does not apply to all companies: Article 19 exempts micro and small companies and the general partnership company except in specified cases. To assess whether your company is required to comply, it is advisable to consult a lawyer specialized in companies.
Practical example
The partners in a limited liability company in Jeddah decided to remove the company's auditor. The company's manager must notify the competent authority of the removal decision and its reasons within 5 days of its issuance, and the auditor retains the right to claim compensation where warranted.
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 18 of the Saudi Companies Law
Who appoints a company's auditor?
The partners, the general assembly, or the shareholders, as the case may be, who determine their fees, term of work, and scope.
Can the auditor be removed?
Yes, without prejudice to their right to compensation where warranted, and the competent authority must be notified of the decision and its reasons within 5 days.
How does an auditor resign?
By written notice submitted to the company, together with a statement of the reasons for resigning submitted to the company and the competent authority.
What is the maximum term of an auditor's work?
It is set by the regulations and is not stated in the article.
More articles on Company Management and Managers' Liability
- Article 11
The article allows founders, partners and shareholders to conclude agreements regulating their relationship, and a family charter for family companies, and makes them binding provided they do not contravene the Law or the company's founding document.
1- يجوز للمؤسسين أو الشركاء أو المساهمين -سواء خلال مدة تأسيس الشركة أو بعدها- ما يأتي: أ- إبرام اتفاق أو أكثر ينظم العلاقة فيما بينهم أو مع الشركة، بما في ذلك
- Article 16
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.
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
- Article 17
Article 17 requires keeping accounting records, preparing annual financial statements and filing them within 6 months of the end of the financial year, and supplying a controlling company with the information it needs.
1- على الشركة الاحتفاظ بالسجلات المحاسبية والمستندات المؤيدة لها لتوضيح أعمالها وعقودها وقوائمها المالية في مركز الشركة الرئيس أو في أي مكان آخر يحدده مدير الشر
- Article 19
The article exempts micro and small companies and the general partnership company from the requirement to appoint an auditor in Article 18, with specified exceptions, and allows holders of 10% of voting rights to request that one be appointed.
1- لا يسري على الشركة متناهية الصغر والصغيرة الحكم المتعلق بإلزامية تعيين مراجع الحسابات الوارد في المادة (الثامنة عشرة) من النظام، عدا الشركة متناهية الصغر وال
- Article 20
The article sets the auditor's obligations: independence and the bar on combining roles or conflicts, his right to inspect company documents, submitting his report to the partners or general assembly, keeping secrets, and liability for his errors.
1- يجب أن يتصف مراجع حسابات الشركة بالاستقلال وفقًا لما تحدده المعايير المهنية المعتمدة في المملكة. 2- لا يجوز الجمع بين عمل مراجع الحسابات والاشتراك في تأسيس ا
- Article 21
Article 21 confirms the right of partners and shareholders to oversee the company's accounts in accordance with the Companies Law and the formation contract or bylaws.
للشركاء والمساهمين حق الرقابة على حسابات الشركة وفقًا للأحكام المنصوص عليها في النظام وعقد تأسيس الشركة أو نظامها الأساس.
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.