Article 40 of the Saudi Cooperative Societies Law
المادة 40 من نظام الجمعيات التعاونية · الباب الثامن: حل الجمعية وتصفيتها
The article provides that liquidation proceeds are distributed to members up to what they actually paid for their shares plus profits realized, with the remainder deposited toward a new society or transferred by the Minister to a similar society.
Official text (Arabic)
This article has not been amended since the law was issued.
يوزع ناتج التصفية على الأعضاء، بحيث لا تتجاوز قيمة ما دفعُه الأعضاء فعلاً ثمناً لأسهُمهم وماتحقق من أرباح ، ويودع الباقي في أحد المصارِف على ذمة إنشاء جمعية تعاونية جديدة، أو بتحويله بقرار من الوزير إلى جمعية تعاونية تُمارِس نشاط الجمعية نفسه أو أي نشاط آخر يكون أقرب إلى نشاطِها.
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 40 explained in plain English
This article determines the fate of the society's funds once liquidation is finished.
First: the members' share
The liquidation proceeds are distributed to the members, but subject to a fixed ceiling: what they receive may not exceed:
- what they actually paid as the price of their shares.
- and the profits realized.
A member thus recovers what he paid and his profits, and gets no more than that even if the surplus is large.
Second: what remains after distribution
The remainder is not distributed to the members, but goes one of two ways:
- It is deposited in a bank toward establishing a new cooperative society.
- Or it is transferred by decision of the Minister to a cooperative society carrying on the same activity as the society, or any other activity closest to its activity.
This provision reflects the nature of cooperative work: the surplus stays in the service of the cooperative sector and does not become private profit for the members.
Note that the article does not set an order of priority among the members if the proceeds are not enough to repay everyone what they paid, so nothing can be stated with certainty on that from its text.
This provision is linked to Article 39, which requires a summary of the liquidation account to be published in a local newspaper and allows any member to challenge it before the Minister within 30 days of publication. Article 41 then brings a different provision, giving the relevant ministries technical supervision of the societies as to their activities.
Anyone with a dispute over his share of the liquidation proceeds may consult a lawyer specializing in commercial and corporate cases.
Practical example
An agricultural cooperative society in Qassim is liquidated. Each member paid SAR 2,000 as the price of his shares, and his shares earned profits of SAR 500. Under this article, each member receives no more than SAR 2,500, and whatever remains of the proceeds is deposited in a bank toward a new cooperative society, or the Minister transfers it to another agricultural cooperative society.
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 40 of the Saudi Cooperative Societies Law
How much does a member get back after a cooperative society is liquidated?
No more than what he actually paid as the price of his shares plus the profits realized.
Where does the surplus from liquidating a cooperative society go?
It is deposited in a bank toward establishing a new cooperative society, or the Minister transfers it to a society carrying on the same activity or the closest one to it.
More articles on Dissolving and Liquidating the Cooperative Society
- Article 25
The article governs the extraordinary meeting of the general assembly: who can call it, its cases such as amending the regulations, disposing of real estate, dissolution, merger and division, and its quorum of a majority of the contributing members.
تعقد الجمعية العمومية اجتماعا غير عادي بدعوة من مجلس الإدارة، أو من مراجع الحسابات، أو بطلب من ثلث أعضائها على الأقل، أو بدعوة من الوزارة، وذلك لبحث إحدى الحالا
- Article 37
The article gives the Minister the right to dissolve a society and liquidate it in six cases, including not starting work for two years, losing more than half the paid-up capital, too few members, and a general assembly decision by three quarters of the shareholders.
للوزير الحق في حل الجمعية وتصفية أعمالِها في أي من الحالات الآتية: 1 - إذا مضت سنتان على تاريخ نشر تسجيلها وإشهارها ولم تباشر عملها . 2 - إذا بلغ مجموع خسائرِها
- Article 38
The article provides that on dissolution of a society the Ministry appoints one or more liquidators, who collect its rights and pay its debts, limit their work to finishing existing business, and prepare a final account reviewed under Article 20.
في حالة حل الجمعية، تُعيِّن الوزارة مُصفي أو أكثر لتصفيتِها. ويقوم المُصفي بإجراء كافة التصرُفات النِظامية اللازِمة لاستيفاء حقوق الجمعية والوفاء بديونِها ، لتح
- Article 39
The article requires a summary of the liquidation account to be published in a local newspaper, allows any member to challenge it before the Minister within 30 days, and requires the Minister to decide within 30 days.
ينشر ملخص حساب التصفية في إحدى الصحف المحلية ، ويجوز لأي من أعضاء الجمعية الطعن فيه أمام الوزير خِلال ثلاثين يوماً من تاريخ النشر ، وعلى الوزير الفصل في الطعن خ
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.