Article 226 of the Saudi Companies Law
المادة 226 من نظام الشركات · الفصل الثاني: اندماج الشركات
The article refers to the regulations to regulate a company's merger into a company that wholly owns it and the merger of companies wholly owned by the same partners, and allows them to be exempted from some provisions of the part.
Official text (Arabic)
This article has not been amended since the law was issued.
تحدد اللوائح ضوابط تنظيم اندماج شركة أو أكثر في شركة مالكة لها بالكامل، أو اندماج شركتين أو أكثر مملوكة بالكامل لنفس الشركاء أو المساهمين، ولها استثناء تلك الحالات من بعض الأحكام الواردة في هذا الباب.
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 226 explained in plain English
This article addresses two special cases of merger in which ownership is already the same:
- The first case: the merger of one or more companies into a company that wholly owns them.
- The second case: the merger of two or more companies wholly owned by the same partners or shareholders.
The article does not itself set the provisions for these two cases. It provides that the regulations set the controls regulating them, and it gives the regulations the power to exempt them from some of the provisions in this part.
The reason for this rule can be understood by looking at Article 225, which for mergers generally requires a merger proposal stating the consideration and the number of stakes or shares, a valuation of each company's assets, and consideration in the form of stakes or shares. Some of these requirements may not have the same effect when the companies are owned by the same persons. As for the provisions that may actually be exempted, the regulations specify them and the article does not mention them.
Article 227 also regulates the announcement of the merger and the right of the merged company's creditors to object to it. To know which of these provisions or exemptions apply to a particular merger, the regulations should be consulted, and it is advisable to consult a lawyer specializing in company matters.
Practical example
A company in Riyadh wholly owns a small subsidiary and wants to merge it into itself to simplify the group's structure. This is one of the cases whose regulation the article refers to the regulations, so they should be consulted to learn the controls and any exempted provisions.
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 226 of the Saudi Companies Law
How is a wholly owned subsidiary merged into its parent company?
The regulations set the controls regulating the merger of a company into a company that wholly owns it, and they may exempt this case from some provisions of the part.
Are companies owned by the same partners subject to all the merger provisions?
The regulations may exempt the merger of companies wholly owned by the same partners or shareholders from some of the provisions in this part.
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.