Article 204 of the Saudi Companies Law
المادة 204 من نظام الشركات · الباب الثامن: الشركة المهنية
The article limits a professional company's activity to its profession or professions and bars it from commercial business, while allowing it to own real estate and invest to serve its purposes under the regulations' rules.
Official text (Arabic)
This article has not been amended since the law was issued.
1- تزاول الشركة المهنية المهنة أو المهن الحرة محل نشاطها فقط.
2- لا يجوز للشركة المهنية ممارسة الأعمال التجارية. ومع ذلك، يجوز لها تملك الأصول العقارية واستثمار أموالها في العقارات أو الأوراق المالية أو أي نوع آخر من الاستثمارات، لخدمة أغراضها. وتحدد اللوائح ضوابط ذلك.
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 204 explained in plain English
This article sets the limits of the activity of the professional company:
1- Permitted activity: the professional company practices the liberal profession or professions that are its activity only.
2- Ban on commercial business: the professional company may not engage in commercial business.
3- The investment exception: it may, to serve its purposes:
- Own real estate assets.
- Invest its funds in real estate.
- Invest in securities.
- Invest in any other type of investment.
The regulations set the rules for this. The investment is limited to serving the company's purposes and to the rules set by the regulations, and it does not turn into a separate commercial activity.
This is consistent with Article 199, which provides that a partner or shareholder in a professional company does not acquire the status of merchant by virtue of his partnership, and with Article 203, which limits practice of the profession to licensed persons.
If the company is considering a side activity or an investment, it is advisable to consult a lawyer specializing in companies and commercial cases to verify that it falls within the permitted limits.
Practical example
A professional engineering consultancy in Jeddah made a financial surplus and wanted to buy a building to use as its headquarters and invest part of its funds in securities. It may do so to serve its purposes under the rules set by the regulations. Opening a shop selling building materials, however, is commercial business that a professional company may not engage in.
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 204 of the Saudi Companies Law
May a professional company engage in trade?
No. A professional company may not engage in commercial business, and it practices only the liberal profession or professions that are its activity.
May a professional company buy real estate or invest in shares?
Yes. It may own real estate assets and invest its funds in real estate, securities or other investments to serve its purposes, under the rules set by the regulations.
More articles on Professional Company
- Article 197
The article defines the professional company as a company formed by one or more persons licensed in one or more liberal professions, or by them together with others, for the purpose of practicing those professions.
الشركة المهنية هي شركة يؤسسها شخص أو أكثر من المرخص لهم نظامًا في ممارسة مهنة حرة واحدة أو أكثر، أو منهم مع غيرهم، ويكون غرضها ممارسة تلك المهن.
- Article 198
The article provides that a professional company takes any of the company forms set out in Article 4 of the Companies Law.
تتخذ الشركة المهنية أيًّا من أشكال الشركات الواردة في المادة (الرابعة) من النظام.
- Article 199
The article applies the rules of its form to the professional company where there is no special provision, and provides that a partner or shareholder in it does not acquire the status of merchant by virtue of the partnership.
1- تسري على الشركة المهنية -فيما لم يرد به نص خاص في هذا الباب- الأحكام الخاصة بشكل الشركة الذي تتخذه، وبما لا يتعارض مع طبيعتها. 2- لا يكتسب الشريك أو المساهم
- Article 200
The article sets the ways to form a professional company: between licensed persons, by one person, across several professions or with a non-Saudi professional company, and participation by unlicensed persons under the regulations.
1- للأشخاص المرخص لهم في ممارسة مهنة حرة واحدة أن يؤسسوا فيما بينهم شركة مهنية بأي شكل من الأشكال الواردة في المادة (الرابعة) من النظام. 2- للشخص المرخص له في م
- Article 201
The article bars a partner or shareholder who practices the profession in a professional company from taking part in another professional company practicing the same profession, unless the formation contract or articles of association provide for it.
لا يجوز للشريك في شركة مهنية ولا للمساهم فيها، الممارسين لمهنة حرة، المشاركة ولا المساهمة في شركة مهنية أخرى تمارس المهنة الحرة ذاتها، ما لم ينص عقد تأسيس الشرك
- Article 202
The article provides that a professional company is formed under the formation procedures prescribed for its form, and that partners may dissolve it only after announcement and written notice to everyone dealing with it, under the regulations.
1- تؤسس الشركة المهنية وفقًا لإجراءات التأسيس المقررة لشكل الشركة. 2- لا يجوز للشركاء ولا للمساهمين في الشركة المهنية حلها إلا بعد الإعلان عن ذلك وإبلاغ جميع ال
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.