Article 39 of the Saudi Companies Law
المادة 39 من نظام الشركات · الفصل الثالث: إدارة شركة التضامن
Article 39 bars a general partnership's manager from acts beyond the company's purpose unless the partners resolve otherwise or the formation contract expressly allows it, and lists acts to which the bar applies in particular.
Official text (Arabic)
This article has not been amended since the law was issued.
يحظر على المدير أن يباشر الأعمال التي تتجاوز غرض الشركة إلا بقرار من الشركاء أو بنصّ صريح في عقد تأسيس الشركة. ويسري هذا الحظر بصفة خاصة على الأعمال الآتية:
أ- إنشاء فروع الشركة، أو إغلاقها.
ب- التبرعات، ما عدا التبرعات الصغيرة المعتادة.
ج- كفالة الشركة للغير.
د- التصالح على حقوق الشركة.
هـ- بيع عقارات الشركة أو رهنها، إلا إذا كان البيع مما يدخل في غرض الشركة.
و- بيع محلّ الشركة التجاري (المتجر) أو رهنه.
ز- الاقتراض نيابة عن 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 39 explained in plain English
This article sets limits on the authority of the manager in a general partnership company. As a rule, they are prohibited from carrying out acts that exceed the company's purpose, except in two cases:
- A resolution of the partners permitting the act is issued.
- There is an express provision in the company's formation contract permitting it.
The article then lists acts to which this prohibition applies in particular:
- Establishing or closing the company's branches.
- Donations, other than small customary donations.
- The company's standing surety for others.
- Settling the company's rights by compromise.
- Selling or mortgaging the company's real estate, unless the sale falls within the company's purpose.
- Selling or mortgaging the company's business (the commercial store).
- Borrowing on behalf of the company.
Note that the exception in item five concerns a sale falling within the company's purpose, such as a company whose activity is selling real estate; the text does not mention mortgage in that exception.
The article connects to Article 38, which shows that the partners' resolutions are issued by numerical majority and requires unanimity to amend the formation contract unless the contract provides otherwise.
To learn the effect of a manager's exceeding these limits in a particular case, it is advisable to consult a lawyer specialized in company and commercial matters.
Practical example
Faisal manages a general partnership company trading in furniture in Riyadh, and he wanted to mortgage the company's warehouse to obtain a loan to expand the business. Borrowing on behalf of the company and mortgaging its real estate are among the acts prohibited to him in particular, so he needs a resolution of the partners or an express provision in the formation contract permitting it.
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 39 of the Saudi Companies Law
Can the manager of a general partnership company borrow in the company's name?
No, except by a resolution of the partners or an express provision in the company's formation contract.
Can the manager sell real estate owned by the company?
Selling or mortgaging the company's real estate is prohibited to the manager, unless the sale falls within the company's purpose, or a resolution of the partners or an express provision in the formation contract permits it.
May the manager make donations from the company's funds?
Donations are prohibited to them except small customary donations, unless there is a resolution of the partners or an express provision in the formation contract.
More articles on General Partnership
- Article 19
The article exempts micro and small companies and the general partnership company from the requirement to appoint an auditor in Article 18, with specified exceptions, and allows holders of 10% of voting rights to request that one be appointed.
1- لا يسري على الشركة متناهية الصغر والصغيرة الحكم المتعلق بإلزامية تعيين مراجع الحسابات الوارد في المادة (الثامنة عشرة) من النظام، عدا الشركة متناهية الصغر وال
- Article 35
Article 35 defines the general partnership company as one formed by two or more persons, each personally and jointly liable with all their assets for its debts, and in which the partner acquires the status of a merchant.
شركة التضامن: هي شركة يؤسسها شخصان أو أكثر من ذوي الصفة الطبيعية أو الاعتبارية يكونون فيها مسؤولين شخصيًّا في جميع أموالهم وبالتضامن عن ديون الشركة والتزاماتها،
- Article 36
Article 36 sets out the data the formation contract of a general partnership company must contain in particular, from the partners' names and capital to management, profits, and dissolution.
يجب أن يشتمل عقد تأسيس شركة التضامن بصفة خاصة على البيانات الآتية: أ- أسماء الشركاء، وبياناتهم. ب- اسم الشركة. ج- المركز الرئيس للشركة. د- غرض الشركة. هأ- رأس م
- Article 37
Article 37 regulates a general partnership company's management: by the partners or a manager they appoint, with rules on multiple managers, their powers, and the company's commitment to their acts within its purpose.
1- يتولى إدارة شركة التضامن الشركاء فيها، ويحدد الشخص ذو الصفة الاعتبارية ممثله في الإدارة. ويجوز أن يتفق الشركاء في عقد تأسيس الشركة أو في عقد مستقل، على تعيين
- Article 38
Article 38 makes partners' resolutions in a general partnership company by numerical majority and requires their unanimity to amend the formation contract unless the contract provides otherwise.
تصدر قرارات الشركاء بالأغلبية العددية، إلا إذا كان القرار متعلقًا بتعديل عقد تأسيس الشركة فيجب أن يصدر بإجماع الشركاء، ما لم ينصّ في عقد التأسيس على غير ذلك.
- Article 40
Article 40 bars a partner in a general partnership company, without the other partners' consent, from competing with a like activity or holding an influential stake in a competitor, and sets the penalty for breach.
لا يجوز للشريك -دون موافقة باقي الشركاء- أن يمارس لحسابه أو لحساب الغير نشاطًا من نوع نشاط الشركة، ولا أن يكون شريكًا أو مديرًا أو عضو مجلس إدارة في شركة تنافسه
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.