Question

Do a research on the the different types of partnerships under Saudi law, including the characteristics of each type. full information please .

Answer 1

Introduction.

Partnerships in Saudi Arabia are generally regulated by the Professional Partnership Regulations, issued pursuant to Royal Decree Number M/4, dated 29 August 1991 and its implementing resolutions (the Professional Companies Law) and the Saudi Companies Regulations, issued pursuant to Royal Decree Number M/3, dated 10 November 2015 (the Companies Law)

The Professional Companies Law sets out various provisions that are specifically applicable to professional partnership companies such as partnership companies formed among qualified professionals such as lawyers, engineers and accountants. However, the Companies Law applies to professional companies to the extent that it does not conflict with the Professional Companies Law or the nature of professional companies.

Types of partnerships in Saudi

There are two type of partnership in Saudi. Business partnerships in Saudi Arabia are generally organised as private limited liability companies or close joint-stock companies. The Companies Law include provisions that govern these two types of partnerships:

a) Partnership companies-: which can be formed by at least two individual (not corporate) partners, whereby liability is not limited and the partners will be jointly and severally liable to third parties for the obligations of the partnership company;

b) Limited partnership companies-: (between two classes of partners)In this type of partnership, general partners responsible for the day-to-day management of the partnership that are fully liable for the debts and liabilities of the partnership, and limited partners, whose liability is limited to their investment in the share capital but cannot be involved in the management of the company.

General Characteristics of the partnership.

• The partners in a partnership company (or general partners in a limited partnership company) are jointly and severally liable to third parties for the obligations and debts of the company;
• Partnerships can only be formed by individuals and cannot be formed by corporate entities;
• The trade name of the company must include all or one of the partners’ names;
• The partners are subject to statutory non-compete covenants.
• The partners in a partnership company cannot exit the company without a court order or if the company has no limited duration, at a time that is appropriate for other partners.

Characteristics of each type of Partnership

A) Liability -; In (type ‘a’) Partnership companies all partners in this partnership are jointly liable to third party debts and obligations. Where as in Limited partnership (Type ‘b’) only the general partners are liable to third party debt and other obligations. Limited partners have only limited liability and they are just an investor.

B) Management-: In general partnership company all partners are part of the management and they jointly performing day to day activities, where as in Limited partnership only general partners has the right to interfere in the day today management of the partnership.

C) Exit procedure-: The partners in a partnership company cannot exit the company without a court order. But in limited partnership, limited partners can exit with a prior notice to other partners.