Article 3 of the Saudi Cooperative Societies Law
المادة 3 من نظام الجمعيات التعاونية · الباب الأول: أحكام عامة
The article requires a society to have at least twelve individuals and caps each member's holding at 10% of capital, with establishment by at least five members allowed exceptionally with a 20% cap.
Official text (Arabic)
This article has not been amended since the law was issued.
تتكون الجمعية من أفراد لا يقل عدَّدُهم عن اثني عشر شخصاً، ولكُل عضو أنَّ يمتلِك عدَّدا من الأسهُم، بشرط ألا يزيد ما يمتلِكُه العضو الواحد عن (10%) من رأس مال الجمعية طوال مُدة اشتِراكِه في الجمعية ، ويجوز في حالات استثنائية يقدرها الوزير تأسيسها بما لايقل عن خمسة أعضاء ، وفي هذه الحالة يشترط ألا يزيد مايمتلكه العضو الواحد على 20% من رأس مال الجمعية طوال مدة اشتراكه 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 3 explained in plain English
This article sets two basic rules for forming a cooperative society: the number of members and the limit on a member's shareholding.
The general rule
- The society is made up of individuals numbering no fewer than twelve persons.
- Each member may own a number of shares, provided that what one member owns does not exceed 10% of the society's capital.
- This limit applies throughout the period of his membership in the society, not only at establishment.
The exception
- In exceptional cases assessed by the Minister, the society may be established with no fewer than five members.
- In this case it is a condition that what one member owns does not exceed 20% of the capital throughout the period of his membership.
The reason for setting an upper limit on a member's ownership is that the cooperative society is based on the joint efforts of its members, so one member is not allowed to take over a large share of the capital. This is consistent with Article 2, which makes the society's aim improving the economic and social condition of its members by following cooperative principles.
Assessing the exceptional cases is left to the Minister under the text, and the article does not state the criteria for this assessment.
Article 4 is linked to this article, providing that the society acquires legal personality on completing registration, announcement and publication in two local newspapers. Anyone who wants to establish a society with fewer than twelve members can consult a lawyer who specializes in commercial and corporate cases.
Practical example
Eight owners of fishing boats in Jazan want to set up a cooperative society. The number is fewer than twelve, so they cannot establish it under the general rule unless the Minister assesses their case as exceptional, in which case at least five members are enough, provided none of them owns more than 20% of the society's capital.
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 3 of the Saudi Cooperative Societies Law
How many members are needed to establish a cooperative society?
No fewer than twelve persons, and in exceptional cases assessed by the Minister, no fewer than five members.
What is the maximum percentage a member can own of a cooperative society's capital?
10% of the capital, rising to 20% in an exceptional establishment by at least five members.
Does the ownership limit apply after establishment?
Yes, it applies throughout the period of the member's membership in the society.
More articles on Establishing and Registering the Cooperative Society
- Article 4
The article provides that a cooperative society acquires legal personality on completing registration, announcement and publication in two local newspapers, and may set up branches with a Ministry license under the Regulations' controls.
تكتسِب الجمعية الشخصية الاعتِبارية بمُجرد إتمام عمليتي التسجيل والإشهار المنصوص عليها في هذا النِظام، والنشر عن ذلك في صحيفتين محليتين. ويجوز للجمعية أن تنشئ له
- Article 8
The article identifies the society's founders and their task of preparing the preliminary founding contract and basic regulations, makes them jointly bear founding expenses, repaid from capital after registration, with no recourse if the society cannot be formed.
يُعد الأشخاص الذين يشترِكون في تكوين جمعية تعاونية مؤسَّسين لها، وهُم الذين يتولون إعداد عقد التأسيس الابتدائي، واللائحة الأساسية للجمعية. ويتحملون بالتضامُن ما
- Article 9
The article sets the particulars a cooperative society's founding contract must contain, such as date of drafting, founders' names, the society's name, seat, type, purposes, capital and nominal share value.
يجب أن يتضمن عقد تأسيس الجمعية ما يأتي: 1 - تاريخ ومكان تحريرِه. 2 - أسماء المؤسَّسين ومحال إقامتِهم ومهنِهم. 3 - اسم الجمعية. 4 - مقر الجمعية ومنطِقة عملِها. 5
- Article 10
The article requires every cooperative society to have basic regulations that include in particular the society's particulars, capital, membership conditions, board of directors, general assembly, profits and dissolution.
يكون لكُلِ جمعية لائحة أساسية تعد وفقا لأحكام هذا النظام متضمنة -على الأخص - ما يأتي: 1 - اسم الجمعية، ومنطِقة عملِها ، ومقرها والغرض أو الأغراض التي أنشئت من أ
- Article 11
The article requires a society's founders to apply to the Ministry for registration, attaching seven documents, including the feasibility study, the founding contract, the basic regulations and the receipt for depositing the share value.
على مؤسِّسي الجمعية التقدُّم للوزارة بطلب تسجيل الجمعية، على أنَّ يُرفق بِه المُستندات الآتية: 1 - دراسة جدوى تأسيس الجمعية . 2 - محضر اجتِماع المؤسِّسين. 3 - ن
- Article 12
The article governs the Ministry's review of registration documents and announcement or refusal within 60 days, failing which the announcement is deemed to have taken place, and gives the founders the right to appeal a refusal to the Minister within 60 days.
تقوم الوزارة بمُراجعة المُستندات الواردة في المادة (الحادية عشرة) من هذا النظام ، فإذا كانت مستوفية لمتطلبات هذا النِظام قامت بإتمام إجراءات الإشهار، وإلا فلها
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.