Article 25 of the Saudi Companies Law

المادة 25 من نظام الشركات · الفصل الثاني: مالية الشركة

The article states when ownership of shares and stock transfers: by commercial register entry for partnership and limited liability shares, by shareholders' register entry for unlisted joint stock and simplified companies, and under the Capital Market Law for listed ones.

Official text (Arabic)

This article has not been amended since the law was issued.

1- تنتقل ملكية الحصص في شركة التضامن وشركة التوصية البسيطة والشركة ذات المسؤولية المحدودة بالقيد لدى السجل التجاري، ولا يُعتد بنقل ملكية الحصة في مواجهة الشركة أو الغير إلا من تاريخ هذا القيد.

2- تتداول أسهم شركة المساهمة غير المدرجة في السوق المالية وشركة المساهمة المبسطة بالقيد في سجل المساهمين المنصوص عليه في المادة (الثانية عشرة بعد المائة) من النظام، ولا يُعتد بنقل ملكية السهم في مواجهة الشركة أو الغير إلا من تاريخ هذا القيد.

3- تتداول أسهم شركة المساهمة المدرجة في السوق المالية وفقًا لأحكام نظام السوق المالية ولوائحه التنفيذية.

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 25 explained in plain English

This article answers a practical question: when does the buyer become the owner of the share or stock as against the company and third parties? The answer differs according to the company's form:

General partnership company, simple limited partnership company and limited liability company: ownership of shares transfers by registration with the commercial register, and the transfer of ownership is not recognized as against the company or third parties until the date of this registration.
Unlisted joint stock company and simplified joint stock company: stock is traded by registration in the shareholders' register provided for in Article 112 of the Law, and the transfer of ownership of the stock is not recognized as against the company or third parties until the date of this registration.
Joint stock company listed on the capital market: its stock is traded in accordance with the provisions of the Capital Market Law and its implementing regulations.

The practical meaning is that signing a contract of sale of the share is not enough for the buyer to rely on his ownership against the company or third parties; what counts is the date of registration in the relevant register. The buyer would therefore do well to follow up on completing the registration.

Anyone about to buy or sell a share would do well to consult a lawyer specializing in companies.

Practical example

Bandar bought a share in a limited liability company in Riyadh and signed the sale contract with the seller. The transfer of ownership of the share to him is not recognized as against the company or third parties until the date the transfer is registered with the commercial register.

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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