Article 74 of the Saudi Companies Law
المادة 74 من نظام الشركات · الفرع الأول: مجلس الإدارة
The article allows the board to take loans of any term, sell and mortgage company assets, sell and mortgage the business, and release debtors, unless restricted by the articles of association or the general assembly.
Official text (Arabic)
This article has not been amended since the law was issued.
يجوز لمجلس الإدارة عقد القروض أيًّا كانت مدتها، أو بيع أصول الشركة، أو رهنها، أو بيع محل الشركة التجاري أو رهنه، أو إبراء ذمة مديني الشركة من التزاماتهم، ما لم ينص نظام الشركة الأساس أو يصدر من الجمعية العامة ما يقيد صلاحيات مجلس الإدارة في ذلك.
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 74 explained in plain English
This article sets out the significant financial powers a joint stock company's board of directors has as a general rule.
The board may:
- Take loans of any term, short or long.
- Sell or mortgage the company's assets.
- Sell or mortgage the company's business (commercial establishment).
- Release the company's debtors from their obligations, that is, waive debts owed to the company by others.
The restriction: These powers belong to the board unless:
- the company's articles of association provide something restricting them, or
- the general assembly issues something restricting them.
Shareholders who want greater protection can place restrictions in the articles of association, such as requiring the assembly's approval for loans above a certain amount, or can have the general assembly issue a resolution to that effect.
Relation to Article 75: The power to sell assets here is not absolute; Article 75 requires the general assembly's approval when selling assets worth more than 50% of the value of the company's total assets, whether in one transaction or several, with the percentage calculated from the date of the first transaction within the preceding 12 months.
The article also follows Article 73, which makes a shareholder's interference in the board's work take place through the general assembly and in accordance with its powers. To draft suitable restrictions in the articles of association, it is advisable to consult a lawyer specialized in companies.
Practical example
The board of a joint stock company in Dammam decided to mortgage one of the company's factories to a bank against a ten-year loan to expand production. The board does not need the general assembly's approval for this, unless the articles of association or a general assembly resolution has restricted its powers to borrow or mortgage.
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 74 of the Saudi Companies Law
Does the board need the general assembly's approval to borrow?
Not as a general rule. The board may take loans of any term unless the articles of association provide, or the general assembly issues, something restricting this.
Can the board waive the company's debts owed by others?
Yes. It may release the company's debtors from their obligations, unless the articles of association or the general assembly restrict this power.
Can the board sell all the company's assets without the shareholders' approval?
No. Article 75 requires the general assembly's approval when selling assets worth more than 50% of the value of the total assets.
More articles on Joint Stock Company
- Article 58
تعرّف المادة شركة المساهمة بأنها شركة يؤسسها شخص أو أكثر، رأس مالها مقسم إلى أسهم قابلة للتداول، تُسأل وحدها عن ديونها، وتقتصر مسؤولية المساهم على قيمة أسهمه.
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
- Article 59
توجب المادة ألا يقل رأس مال شركة المساهمة المصدر عن خمسمائة ألف ريال، وألا يقل المدفوع منه عند التأسيس عن الربع.
يجب ألا يقلّ رأس مال شركة المساهمة المصدر عن (خمسمائة ألف) ريال، ويجب ألا يقلّ المدفوع منه عند التأسيس عن (الربع).
- Article 60
تقرر المادة أن لشركة المساهمة رأس مال مصدرًا يمثل الأسهم المكتتب بها، وتجيز تحديد رأس مال مصرح به يزيد مجلس الإدارة المصدر في حدوده بعد دفعه بالكامل.
1- يكون لشركة المساهمة رأس مال مصدر يمثل الأسهم المكتتب بها، ويجوز أن يحدد نظام الشركة الأساس رأس مال مصرحًا به. 2- يجوز بقرار من مجلس إدارة الشركة زيادة رأس ال
- Article 61
The article lists what the articles of association of a joint stock company must contain and the documents attached to them when applying to incorporate the company.
1- يجب أن يشتمل النظام الأساس لشركة المساهمة بصفة خاصة على البيانات الآتية: أ- اسم الشركة. ب- المركز الرئيس للشركة. ج- غرض الشركة. د- رأس مال الشركة المصرح به -
- Article 62
The article requires the founders, if they do not subscribe to all the company's shares themselves during incorporation, to offer the remaining shares for subscription in accordance with the Capital Market Law.
إذا لم يقصر المؤسسون خلال مرحلة التأسيس الاكتتاب بجميع الأسهم على أنفسهم، وجب عليهم طرح الأسهم التي لم يكتتبوا بها للاكتتاب وفقًا لنظام السوق المالية.
- Article 63
The article gives the Ministry and the Authority the power to set the controls, procedures, documents and approvals for incorporating a joint stock company whose shares are offered for public subscription during incorporation or which is listed on the capital market.
للوزارة والهيئة وضع الضوابط والإجراءات وتحديد الوثائق والموافقات اللازمة لتأسيس شركة مساهمة تطرح أسهمها للاكتتاب العام خلال مرحلة التأسيس أو تدرج في السوق المال
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.