Article 59 of the Saudi Companies Law

المادة 59 من نظام الشركات · الفصل الأول: أحكام عامة

Article 59 requires a joint stock company's issued capital to be at least SAR 500,000, with not less than one quarter paid at formation.

Official text (Arabic)

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

يجب ألا يقلّ رأس مال شركة المساهمة المصدر عن (خمسمائة ألف) ريال، ويجب ألا يقلّ المدفوع منه عند التأسيس عن (الربع).

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 59 explained in plain English

This article sets the minimum capital of a joint stock company and contains two conditions:

Issued capital: it must not be less than SAR 500,000.
Paid at formation: it must not be less than one quarter of the issued capital.

So if the issued capital is at its minimum (SAR 500,000), the amount paid at formation must not be less than SAR 125,000. If the issued capital is larger, the quarter is calculated on that basis.

This means the founders need not pay the whole issued capital at formation, but they must pay at least a quarter; this article does not set out the rules for paying the remainder.

The aim of the minimum is that a joint stock company have a suitable financial base, especially as a shareholder is not liable for its debts except up to the value of their shares, as Article 58 provides in defining the joint stock company as a company formed by one or more persons, with capital divided into tradable shares, and alone liable for its debts.

Article 60 then states that a joint stock company has an issued capital representing the subscribed shares, that its bylaws may set an authorized capital, and that the board of directors may increase the issued capital within it if the issued capital has been paid in full.

To plan the capital structure when forming your company, it is advisable to consult a lawyer specialized in company and commercial matters.

Practical example

A group of businessmen in Riyadh want to form a joint stock company with an issued capital of SAR 2,000,000. What they pay at formation must not be less than a quarter of this amount, that is, SAR 500,000. If they wanted an issued capital of only SAR 400,000, that would not be allowed because it is below the minimum.

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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