Article 224 of the Saudi Companies Law
المادة 224 من نظام الشركات · الفصل الأول: تحول الشركات
The article provides that converting a general or simple limited partnership does not discharge the partners with joint liability from pre-conversion debts, unless the creditors expressly accept or none objects within 30 days.
Official text (Arabic)
This article has not been amended since the law was issued.
لا يترتب على تحول شركة التضامن أو شركة التوصية البسيطة إلى أي شكل من أشكال الشركات، إبراء ذمة الشركاء المتضامنين من مسؤوليتهم عن ديون الشركة السابقة للتحول، إلا إذا قبل الدائنون ذلك صراحة أو إذا لم يعترض أي منهم على قرار الشركاء بالتحول خلال (ثلاثين) يومًا من تاريخ إبلاغه به بخطاب مسجل أو بوسائل التقنية الحديثة.
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 224 explained in plain English
In a general partnership and a simple limited partnership, a partner with joint liability is personally liable for the company's debts. Some may think that converting the company to another form, such as a limited liability company, ends this liability for old debts. This article provides otherwise.
The rule: The conversion of a general partnership or simple limited partnership to any other form does not discharge the partners with joint liability from their liability for the company's debts that predate the conversion.
The two exceptions: A partner with joint liability is discharged from these debts in two cases only:
- If the creditors expressly accept this.
- If none of them objects to the partners' conversion resolution within 30 days of the date they were notified of it by registered letter or by modern technological means.
It follows that notifying the creditors of the conversion resolution by one of the two means mentioned is of practical importance to the partners with joint liability, because the lapse of the period without objection from any creditor is one of the two routes to discharge.
This rule is consistent with Article 223, which provides that conversion does not create a new legal person and that the company remains liable for its earlier obligations. To assess the position of the debts in a particular case, it is advisable to consult a lawyer specializing in company matters.
Practical example
Ali and Nasser, partners with joint liability, converted their general partnership in Riyadh into a limited liability company and notified the company's creditors of the conversion resolution by registered letter. One creditor objected within 20 days. They are therefore not discharged by this route from liability for the company's debts that predate the conversion, unless the creditors expressly accept to release them.
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 224 of the Saudi Companies Law
Is a partner with joint liability freed from the company's debts after it converts to a limited liability company?
No. They remain liable for the company's debts that predate the conversion, unless the creditors expressly accept to release them or none of them objects within 30 days of being notified of the conversion resolution.
How is a creditor notified of the conversion of a general partnership?
By registered letter or by modern technological means, and the creditor's period to object is 30 days from the date they were notified.
Does the liability cover new debts after the conversion?
The article concerns the company's debts that predate the conversion, and it does not address debts arising after it.
More articles on Company Conversion and Merger
- Article 215
The article allows the partners or shareholders to convert a professional company into another form of company listed in Article 4, after meeting the conditions of the Law and the regulations.
يجوز للشركاء أو المساهمين في الشركة المهنية تحويلها إلى شكل آخر من أشكال الشركات الواردة في المادة (الرابعة) من النظام، وذلك بعد استيفاء الشروط والضوابط التي ين
- Article 220
The article regulates converting a company from one form to another, the conditions for converting to a simplified joint stock or joint stock company, and transferring sole proprietorship assets to companies.
1- يجوز تحول الشركة إلى شكل آخر من الشركات بقرار يصدر وفقًا للأوضاع المقررة لتعديل عقد تأسيسها أو نظامها الأساس وبعد استيفاء شروط التأسيس والقيد والشهر المقررة
- Article 221
The article states when a private non-profit company may convert to another form and on what conditions, and permits any company to convert to a non-profit company by unanimous consent of the partners.
1- مع مراعاة حكم الفقرة (1) من المادة (العشرين بعد المائتين) من النظام، يجوز تحول الشركة غير الربحية الخاصة دون العامة إلى أي شكل من الشركات ما لم ينص عقد تأسيس
- Article 222
The article gives a partner or shareholder who objects to a company's conversion resolution the right to withdraw by written request within 15 days, with payment of the value of their stakes or shares.
دون إخلال بأحكام التنازل عن الحصص أو الأسهم المقررة بحسب شكل الشركة، للشركاء أو المساهمين الذين يعترضون على قرار التحول التخارج من الشركة بناء على طلب مكتوب يقد
- Article 223
The article provides that a company's conversion does not create a new legal person, so the company keeps its rights and remains liable for its pre-conversion obligations.
لا يترتب على تحول الشركة نشوء شخص ذي صفة اعتبارية جديد، وتظل الشركة محتفظة بحقوقها ومسؤولة عن التزاماتها السابقة للتحول.
- Article 225
The article sets out the two forms of company merger, what a merger proposal must contain and how it is approved, and the conditions for a valid merger and the consideration in it.
1- يكون الاندماج بضم شركة أو أكثر إلى شركة أخرى قائمة، أو بمزج شركتين أو أكثر لتأسيس شركة جديدة. 2- يجب أن يعد مقترح الاندماج للموافقة عليه من كل شركة طرف فيه و
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.