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Article 185 of the Saudi Companies Law

المادة 185 من نظام الشركات · الباب السابع: الشركة غير الربحية

The article defines public and private non-profit companies, sets the forms they may take, prohibits offering their shares for public subscription, and applies the rules of their form where this chapter is silent.

Official text (Arabic)

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

1- الشركة غير الربحية العامة: هي شركة تتخذ شكل شركة المساهمة وليس لها اتخاذ أي شكل آخر، وتنفق الأرباح المتحققة من ممارسة نشاطها في أي من المصارف والمجالات غير الربحية العامة التي تهدف حصرًا إلى خدمة المجتمع بعمومه. وتحدد الوزارة بالتنسيق مع المركز الوطني لتنمية القطاع غير الربحي تلك المصارف والمجالات.

2- الشركة غير الربحية الخاصة: هي شركة تتخذ شكل الشركة ذات المسؤولية المحدودة أو شركة المساهمة أو شركة المساهمة المبسطة وليس لها اتخاذ أي شكل آخر، وتنفق الأرباح المتحققة من ممارسة نشاطها في أي من المصارف والمجالات غير الربحية.

3- يحظر على الشركة غير الربحية طرح أسهمها للاكتتاب العام.

4- تسري على الشركة غير الربحية فيما لم يرد به نص في هذا الباب الأحكام الخاصة بشكل الشركة الذي تتخذه، وبما لا يتعارض مع طبيعتها.

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 185 explained in plain English

This article opens the chapter on the non-profit company, which is a company that carries on an activity and may make profits, but spends its profits on non-profit purposes instead of distributing them. The article distinguishes two types:

1- The public non-profit company:

  • It takes the form of a joint stock company only, and may not take any other form.
  • It spends its profits on non-profit public outlets and fields aimed exclusively at serving society as a whole.
  • The Ministry specifies these outlets and fields in coordination with the National Center for Non-Profit Sector Development.

2- The private non-profit company:

  • It takes the form of a limited liability company, a joint stock company or a simplified joint stock company, and may not take any other form.
  • It spends its profits on any non-profit outlets and fields, without a requirement that they serve society as a whole.

3- Prohibition of public subscription: no non-profit company may offer its shares for public subscription.

4- Supplementary rules: on matters this chapter does not address, the rules of the company form the non-profit company takes apply to it, to the extent they do not conflict with its non-profit nature.

Article 186 completes this regulation by specifying the outlets and fields that must be stated in the articles of association. To choose the type and form suited to your initiative, it is advisable to consult a lawyer specializing in companies and commercial cases.

Practical example

A group of businessmen in Riyadh want to set up an entity that runs vocational training centers and spends its profits on serving society in general. If they choose the public non-profit company, it must be a joint stock company. If a family wanted to set up a non-profit company that spends its profits on a non-profit field of its choosing, it could choose the private non-profit company in the form of a limited liability company. In both cases, the shares may not be offered for public subscription.

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 185 of the Saudi Companies Law

What is the difference between a public and a private non-profit company?

The public one takes the form of a joint stock company only and spends its profits on fields aimed exclusively at serving society as a whole. The private one takes the form of a limited liability company, a joint stock company or a simplified joint stock company and spends its profits on any non-profit fields.

Does a non-profit company make profits?

Yes. It carries on its activity and makes profits, but spends them on non-profit outlets and fields.

May a non-profit company offer its shares on the market?

No. A non-profit company is prohibited from offering its shares for public subscription.

Who specifies the fields of the public non-profit company?

The Ministry specifies them in coordination with the National Center for Non-Profit Sector Development.

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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.