Article 225 of the Saudi Companies Law
المادة 225 من نظام الشركات · الفصل الثاني: اندماج الشركات
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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 وفقًا للأوضاع المقررة لتعديل عقد تأسيسها أو نظامها الأساس، ويحدد مقترح الاندماج شروطه، ويبين طبيعة العوض وقيمته بما في ذلك عدد الحصص أو الأسهم التي تخص الشركة المندمجة في رأس مال الشركة الدامجة أو الشركة الناشئة عن الاندماج، وبيانًا عن قدرة كل شركة طرف في الاندماج على الوفاء بديونها.
3- مع مراعاة ما تقضي به الأنظمة ذات العلاقة، يجوز للشركة ولو كانت في دور التصفية بناء على أحكام النظام أن تندمج في شركة أخرى من شكلها أو من شكل آخر.
4- لا يكون الاندماج صحيحًا إلا بعد تقييم أصول كل شركة طرف فيه.
5- يكون المقابل في الاندماج حصصًا أو أسهمًا في الشركة الدامجة أو الناشئة عن الاندماج.
6- للجهة المختصة تحديد ضوابط وإجراءات تنفيذ ما ورد في هذه المادة، بما في ذلك المقابل النقدي لشراء كسور الحصص أو الأسهم، أو لتعويض الشريك أو المساهم المعترض على قرار الاندماج، وضوابط تصويت الشريك أو المساهم في حال وجود مصلحة له بخلاف مصلحته بصفته شريكًا أو مساهمًا في الشركة.
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 225 explained in plain English
This article is the foundation for regulating company mergers, and it addresses the following:
1- The two forms of merger: Either absorption, that is, absorbing one or more companies into another existing company, or consolidation, that is, combining two or more companies to form a new company.
2- The merger proposal: It must be prepared for approval by each company party to it according to the procedures for amending its articles of association or bylaws. The proposal sets out the terms of the merger and states the nature and value of the consideration, including the number of stakes or shares that the merged company is entitled to in the capital of the absorbing company or the company arising from the merger, and a statement on each party company's ability to pay its debts.
3- A company in liquidation: Subject to what the relevant laws provide, a company may merge into another company of its form or of another form even if it is in the liquidation stage under the provisions of the Law.
4- Condition of validity: A merger is not valid except after the assets of each company party to it have been valued.
5- The consideration: It consists of stakes or shares in the absorbing company or the company arising from the merger.
6- Detailed controls: The competent authority may specify the controls and procedures for implementation, including the cash consideration for buying fractions of stakes or shares or for compensating a person who objects to the merger, and the controls on voting by anyone whose interest differs from their interest as a partner or shareholder.
Article 226 refers to the regulations to regulate the merger of a company into a company that wholly owns it, or the merger of companies wholly owned by the same partners. Because a merger is a complex process, it is advisable to use a lawyer specializing in company matters.
Practical example
Two distribution companies in Riyadh and Jeddah agree that the first will absorb the second. A merger proposal is prepared setting out its terms, the number of shares the partners of the merged company will receive in the absorbing company, and a statement on each company's ability to pay its debts. The assets of both companies are valued before the merger is completed, and then each company approves it according to the procedures for amending its articles of association.
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 225 of the Saudi Companies Law
What types of company mergers exist in Saudi law?
Absorption, which is absorbing one or more companies into an existing company, and consolidation, which is combining two or more companies to form a new company.
Can a company in liquidation merge?
Yes. A company may merge into another company of its form or another form even if it is in the liquidation stage under the provisions of the Law, subject to what the relevant laws provide.
What consideration do the partners of the merged company receive?
The consideration consists of stakes or shares in the absorbing company or the company arising from the merger, and the competent authority may specify the cash consideration for buying fractions of stakes or shares.
When is a merger valid?
Only after the assets of each company party to it have been valued.
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 224
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.
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
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.