Article 58 of the Saudi Companies Law

المادة 58 من نظام الشركات · الفصل الأول: أحكام عامة

Article 58 defines the joint stock company as formed by one or more persons, with capital divided into tradable shares, liable alone for its debts, with a shareholder's liability limited to the value of the shares subscribed.

Official text (Arabic)

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

شركة المساهمة: هي شركة يؤسسها شخص واحد أو أكثر، من ذوي الصفة الطبيعية أو الاعتبارية، ويكون رأس مالها مقسمًا إلى أسهم قابلة للتداول، وتكون الشركة وحدها مسؤولة عن الديون والالتزامات المترتبة عليها أو الناشئة عن نشاطها، وتقتصر مسؤولية المساهم على أداء قيمة الأسهم التي اكتتب فيها.

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 58 explained in plain English

This article sets out the meaning of the joint stock company and its basic characteristics:

Founders: it is formed by one or more persons, natural or legal. It may therefore be formed by a single person.
Capital: divided into tradable shares.
Liability of the company: the company alone is liable for the debts and obligations falling on it or arising from its activity.
Liability of the shareholder: it is limited to paying the value of the shares they subscribed, so they are not claimed against from their private funds for the company's debts.

The importance of this definition appears when compared with other forms of company: while a general partner is liable with all their assets for the company's debts, a shareholder knows in advance that the most they can lose is the value of the shares they subscribed.

Article 59 then sets the minimum capital of an issuing joint stock company, which is SAR 500,000, provided that the amount paid at formation is not less than one quarter.

To know whether a joint stock company is the right form for your venture, it is advisable to consult a lawyer specialized in company and commercial matters.

Practical example

Salman bought shares worth SAR 100,000 in a joint stock company, and the company later accumulated large debts. Under this article the company alone is liable for its debts, and Salman's liability is limited to paying the value of the shares he subscribed, so he is not asked to pay the company's debts from his other funds.

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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