Article 4 of the Saudi Companies Law
المادة 4 من نظام الشركات · الفصل الأول: تأسيس الشركة
Article 4 sets out the five forms, one of which every company formed under the Companies Law must take.
Official text (Arabic)
This article has not been amended since the law was issued.
تتخذ الشركة التي تؤسس وفقًا لأحكام النظام أحد الأشكال الآتية:
أ- شركة التضامن.
ب- شركة التوصية البسيطة.
ج- شركة المساهمة.
د- شركة المساهمة المبسطة.
هـ- الشركة ذات المسؤولية المحدودة.
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 4 explained in plain English
This article limits the forms of companies that may be formed under the Companies Law. A company must take one of the following five forms:
- General partnership company.
- Simple limited partnership company.
- Joint stock company.
- Simplified joint stock company.
- Limited liability company.
The article's wording, "shall take one of the following forms," means that whoever forms a company under the Companies Law must choose one of these forms. Each form has its own provisions elsewhere in the Companies Law, covering formation, management, the liability of partners, and capital; this article does not detail those provisions but merely lists the forms.
The choice of form has a direct practical effect, since the company name is tied to it: Article 5 requires the trade name to be accompanied by an indication of the company's form. This article also follows Article 3, which provides that a company formed under the Companies Law is of Saudi nationality.
Because the choice among these forms depends on the nature of the venture, the number of partners, and the level of risk, it is worth consulting a lawyer specialized in companies before formation.
Practical example
Three friends in Dammam plan to open a restaurant. When submitting the formation application they must choose one of the five forms in this article, such as a limited liability company or a general partnership company, and the provisions specific to the chosen form will then apply to 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 4 of the Saudi Companies Law
What types of companies exist under the Saudi Companies Law?
Five forms: general partnership company, simple limited partnership company, joint stock company, simplified joint stock company, and limited liability company.
Can a company be formed in a form other than those listed?
The article provides that a company formed under the Companies Law takes one of these five forms.
Must the company's form appear in its name?
Yes. Article 5 requires the trade name to be accompanied by an indication of the company's form.
More articles on Company Formation
- Article 1
This article defines the key terms of the Companies Law, such as the Ministry, the Authority, the competent authority, relatives and day, and leaves the definition of other terms to the regulations.
1- يقصد بالكلمات والعبارات الآتية -أينما وردت في هذا النظام- المعاني الموضحة أمام كل منها، ما لم يقتضِ السياق غير ذلك: المملكة: المملكة العربية السعودية. النظام
- Article 2
Article 2 defines a company as a legal entity in which two or more persons contribute to a profit-seeking venture to share its profit and loss, and allows a company to be formed by one person or as a non-profit.
الشركة كيان قانوني يؤسس وفقًا لأحكام النظام بناء على عقد تأسيس أو نظام أساس يلتزم بمقتضاه شخصان أو أكثر بأن يساهم كل منهم في مشروع يستهدف الربح بتقديم حصة من ما
- Article 3
Article 3 provides that every company formed under the Companies Law is of Saudi nationality and must have its principal center in the Kingdom.
تعد الشركة التي تؤسس وفقًا لأحكام النظام سعودية الجنسية، ويجب أن يكون مركزها الرئيس في المملكة.
- Article 5
The article regulates a company's trade name: its language and sources, the former partner's consent to the use of his name, the indication of the company's form, and amendment of the name without affecting its rights and obligations.
1- يكون لكل شركة اسم تجاري باللغة العربية أو بلغة أخرى، ويجوز أن يكون الاسم مشتقًا من غرضها، أو اسمًا مميزًا، أو اسم واحد أو أكثر من الشركاء أو المساهمين فيها ا
- Article 6
Article 6 states who counts as a founder, regulates submitting the formation application to the commercial register, and gives founders the right to appeal a refusal to the Ministry and then to the competent judicial body.
1- يعد مؤسسًا كل من اشترك فعليًّا في تأسيس الشركة وساهم في رأس مالها بحصة نقدية أو عينية. 2- يقدم المؤسسون طلب تأسيس الشركة وقيدها إلى السجل التجاري، مرافقًا له
- Article 7
Article 7 specifies the founding document for each form of company, requires it to contain what the Companies Law requires and to be in Arabic, and directs the Ministry to prepare guidance templates.
1- يكون لكل شركة تؤسس وفقًا لأحكام النظام عقد تأسيس، عدا شركة المساهمة وشركة المساهمة المبسطة والشركة ذات المسؤولية المحدودة المملوكة لشخص واحد، فيكون لكل منها
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.