Article 206 of the Saudi Companies Law
المادة 206 من نظام الشركات · الباب الثامن: الشركة المهنية
The article bars a partner or shareholder in a professional company not owned by one person from practicing his profession outside it except with the partners' written approval or the general assembly's approval; otherwise his fees belong to the company.
Official text (Arabic)
This article has not been amended since the law was issued.
1- لا يجوز للشريك ولا للمساهم في الشركة المهنية ممارسة مهنته الحرة إلا عن طريقها، ما لم تكن مملوكة لشخص واحد.
2- استثناء مما ورد في الفقرة (1) من هذه المادة، يجوز للشريك أو المساهم ممارسة مهنته الحرة عن طريق غير الشركة إذا وافق باقي الشركاء على ذلك كتابة أو حصل على موافقة الجمعية العامة بحسب الأحوال.
3- إذا أخل الشريك أو المساهم بما ورد في أي من الفقرتين (1) و(2) من هذه المادة، كان ما يتحصل عليه من أتعاب ومنافع مالية أخرى حقًّا للشركة.
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 206 explained in plain English
This article protects the professional company from its partners competing with it in the same profession.
1- The rule: a partner or shareholder in a professional company may not practice his liberal profession except through the company. This restriction does not apply if the company is owned by one person.
2- The exception: a partner or shareholder may practice his profession other than through the company if:
- The other partners approve in writing, or
- He obtains the approval of the general assembly,
as the case may be, meaning according to the nature and form of the company.
3- Penalty for violation: if the partner or shareholder breaches the two preceding paragraphs, the fees and other financial benefits he obtains belong to the company. A violating partner does not benefit from what he earned from his professional work outside the company without approval.
This article is connected to Article 205, which subjects the company to the supervision of the body concerned with the profession, and to Article 207, which regulates the management of the professional company. It differs from Article 201, which bars a practicing partner from taking part in another professional company practicing the same profession. If a partner wishes to carry out independent professional work, it is advisable for him to consult a lawyer specializing in companies and commercial cases first.
Practical example
A licensed doctor is a partner with two colleagues in a professional medical company in Jeddah, and he began seeing patients at another clinic and receiving fees without his partners' written approval. Under the article, the fees he collected from this work belong to the company. Had he obtained his partners' prior written approval, it would have been permitted.
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 206 of the Saudi Companies Law
May a partner in a professional company work for his own account?
He may not practice his profession except through the company, unless it is owned by one person, or unless the other partners approve in writing or he obtains the general assembly's approval, as the case may be.
What happens if a partner works outside the company without approval?
The fees and other financial benefits he obtains belong to the company.
Is the partners' oral approval enough?
The article provides for the written approval of the other partners, or the approval of the general assembly, as the case may be.
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.