Article 5 of the Saudi Cooperative Societies Law
المادة 5 من نظام الجمعيات التعاونية · الباب الأول: أحكام عامة
The article makes the share price fixed and indivisible and regulates a withdrawing member's assignment or redemption of shares, loss of membership and expulsion, and heirs taking a deceased member's place.
Official text (Arabic)
This article has not been amended since the law was issued.
مع مراعاة ما ورد في المادة (الثالثة) من هذا النظام ، يكون سعر السهم ثابِتا، ولا تجوز تجزئتُه ، ويمكن للعضو المنسحب من الجمعية التنازل عن قيمة أسهمه لعضو في الجمعية أو لمساهم جديد بعد موافقة مجلس الإدارة ، فإذا تعذر التنازل واقتنع مجلس الإدارة بأسباب الانسحاب كان للعضو المنسحب أن يسترد قيمة أسهمه بعد إضافة ماحققته من أرباح أو حسم مالحق بها من خسائر . وكذلك الأمر إذا ما فقد عضو عضويته بفقد أحد شروطها أو بالفصل . وفي حالة الوفاة يحل الورثة أو بعضهم محل مورثهم أو يتفقون على إحلال أحدهم محله على أن تتوافر شروط العضوية في الوارث ،وإلا ردت إليهم قيمة الأسهم بعد إضافة ماحققته من أرباح أو حسم مالحق بها من خسائر .
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 5 explained in plain English
This article regulates the shares of the cooperative society and what happens to them when a member leaves, subject to Article 3, which sets the member's ownership limit at 10% of the capital (or 20% in an exceptional establishment by five members).
First: the nature of the share: the share price is fixed and the share may not be divided.
Second: the withdrawing member
- He may assign the value of his shares to a member of the society or to a new shareholder, with the approval of the board of directors.
- If assignment is not possible and the board of directors is satisfied with the reasons for withdrawal, he may redeem the value of his shares, with any profits they have made added or any losses affecting them deducted.
Third: loss of membership or expulsion: the same rule applies if a member loses his membership by losing one of its conditions or by expulsion.
Fourth: death
- The heirs or some of them take the deceased's place, or they agree to put one of them in his place.
- Provided that the conditions of membership are met in the heir.
- Otherwise the value of the shares is returned to them, with profits added or losses deducted.
Note that redemption on withdrawal is subject in the text to two things together: that assignment is not possible, and that the board of directors is satisfied with the reasons for withdrawal.
Article 6 is linked to it, setting the member's liability for the society's rights and obligations to the extent of the shares he owns. Anyone facing a dispute over redeeming their shares or those of the person they inherit from can consult a lawyer who specializes in commercial and corporate cases.
Practical example
Salman moved from Dammam to another city and wanted to withdraw from a consumer cooperative society in which he holds shares. Under this article he can assign his shares to another member or a new shareholder with the board of directors' approval; if that is not possible and the board is satisfied with his reasons for withdrawing, he redeems the value of his shares with their profits added or losses deducted.
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 5 of the Saudi Cooperative Societies Law
Can I redeem the value of my shares when withdrawing from a cooperative society?
If assigning the shares is not possible and the board of directors is satisfied with the reasons for withdrawal, the member redeems the value of his shares with profits added or losses deducted.
What happens to a deceased member's shares?
The heirs or some of them take his place or agree to put one of them in his place, provided membership conditions are met in the heir; otherwise the value of the shares is returned to them with profits added or losses deducted.
Does the share price of a cooperative society change?
No. The share price is fixed and the share may not be divided.
Articles this article refers to
More articles on Cooperative Society Membership and Shares
- Article 3
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.
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 ال
- Article 6
The article bars attaching a society's funds except to satisfy its debts under a court judgment, and limits a member's liability for the society's rights and obligations to the shares he owns.
لايجوز الحجز على أموال الجمعية إلا وفاء لديونها وبموجب حكم قضائي ، وتتحدد مسؤولية العضو في حقوق الجمعية وإلتزاماتها بقدر مايملكه من الأسهم .
- Article 7
The article provides that the door of membership in a cooperative society is open to those who meet the membership conditions, except in exceptional cases set by the Regulations.
باب العضوية بالجمعية مفتوح لمن تنطبق عليهم شروط العضوية ، إلا في حالات استثنائية تحددها اللائحة .
- Article 23
The article gives each member one vote in the general assembly however many shares he owns, and lets him appoint another member who is not a board member as proxy, with no member acting for more than one.
لكل عضو صوت واحد في الجمعية العمومية مهما بلغت الأسهم التي يملكها، وللعضو أن يوكل عضوًا آخر في الجمعية من غير أعضاء مجلس الإدارة، ولا يجوز للعضو أن يكون وكيلاً
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.