Five partners own one company. Three of them attend the meeting, consider themselves the majority, and vote to amend the articles of association and change the manager. But together the three hold only 45% of the capital. In a general assembly, the number of people present decides nothing. What decides is the type of company, the percentage of shares held, and the type of decision.
The short answer: in a Saudi limited liability company (LLC), an ordinary decision needs the approval of partners holding more than half of the capital, and amending the articles needs three quarters. In an unlisted joint stock company (JSC), there is an attendance quorum counted by voting shares, and the decision is taken by a majority of the votes present: a simple majority in an ordinary assembly and two thirds in an extraordinary one.
Is the company an LLC or a joint stock company?
Open the Commercial Register and the articles of association (or the bylaws of a JSC) before doing any calculation. In an LLC, the general assembly is made up of all the partners, and its own rules are in Articles 165 to 172 of the Companies Law.
In a joint stock company, the law distinguishes two assemblies. The extraordinary general assembly deals with amending the bylaws, deciding whether the company continues or is dissolved, and approving the company buying its own shares (Article 85). The ordinary general assembly deals with everything else, including electing and removing board members, appointing the auditor, discussing the financial statements and deciding on profit distribution (Article 87).
This article covers the LLC and the unlisted joint stock company. The simplified joint stock company has its own chapter in the law. For companies listed on the stock market, the “competent authority” is the Capital Market Authority rather than the Ministry of Commerce (Article 1), and they are also subject to the Capital Market Law and the Authority's rules, so check those before applying what is said here.
Who calls the partners' assembly in an LLC, and when?
The manager calls the general assembly as set out in the articles of association. It must meet at least once a year within the six months after the end of the financial year (Article 165).
It may also be called at any time at the request of the managers, the auditor, or one or more partners holding at least 10% of the capital. The notice is sent to all partners by registered letter, by modern technology, or by any means the articles specify, at least 21 days before the meeting. Partners holding all the shares may meet without following these formalities and periods. The condition is "all" the shares, not a majority of them.
Meetings and voting may be held remotely using modern technology. Discussions and decisions are recorded in minutes in a special register kept by the company.
What majority does an LLC decision need in Saudi Arabia?
In the LLC chapter you will not find a separate attendance quorum like the one for joint stock companies. Article 166 looks at approval: a decision is valid only if approved by one or more partners holding more than half of the capital, unless the articles of association require a larger majority. Each partner has a number of votes equal to his number of shares, and no other arrangement may be agreed (Article 171).
If this majority is not reached in the first meeting or consultation, the partners must be called to a new meeting. There, decisions are taken by a majority of the shares represented at the meeting, whatever their percentage of the capital, unless the articles say otherwise. This lighter rule applies only to the second round. It cannot be used to correct a decision taken in the first round without the required majority.
In the first meeting, partners holding 45% approve the appointment of a new manager. The decision is not passed.
The partners are called to a second meeting. Partners holding 60% attend, and those holding 40% approve.
40 out of 60 is a majority of the shares represented, so the ordinary decision is passed in the second meeting, unless the articles require otherwise.
Some decisions need a special majority:
| Decision | Required majority | Article |
|---|---|---|
| Ordinary decisions | More than half of the capital, or more if the articles require | 166 |
| Removing the manager | The usual majority; a manager who is a partner does not vote on his own removal | 164, and Article 63 of the Implementing Regulations |
| Amending the articles of association, increasing or reducing capital | At least three quarters of the capital | 172 |
| Increasing the nominal value of shares, or suspending the pre-emption right | Unanimous approval of the partners | 172 |
| Adding a drag-along clause to the articles | At least 90% of the capital | 181 |
| Extending the term of a fixed-term company | Partners holding half of the shares, unless the articles require more | 183 |
Some shares do not vote at all. Shares the company has bought back have no vote in the assembly (Article 180), and the company may suspend the voting right of a partner who failed to pay his contribution on time (Article 15). So count the eligible votes before you calculate the percentage.
Can LLC partners decide in writing, by proxy, and with their own agenda items?
A meeting is not always needed. Article 166 allows written resolutions (by circulation): the manager sends each partner the proposed decisions and their documents so he can vote in writing, by registered letter, personal delivery, email or other technology, unless the articles set another method. The majority required in writing is the same.
A partner may appoint another partner in writing to attend and vote for him, unless the articles prohibit this. He may not appoint a non-partner unless the articles allow it (Article 171). So a proxy for your accountant or a relative may not be valid if the articles say nothing about it.
At least 21 days before the annual assembly, the partners must receive the financial statements, the activity report and the auditor's report, if there is one (Article 167). The annual agenda includes the manager's report, the statements, the auditor's report and the decision on profit distribution (Article 168). The assembly may discuss only items on the agenda, unless facts arise during the meeting that require it. If a partner asks for an item to be added, the manager must respond, otherwise the partner may refer the matter to the assembly (Article 169).
What are the quorum and voting rules in an unlisted joint stock company?
The board of directors calls the general assemblies. It must call the ordinary assembly within 30 days if the auditor or shareholders holding 10% of the voting shares request it. If the board delays responding to the auditor's request, the auditor may call it himself, and the competent authority may also call it in cases set by the law (Article 90). The notice is sent at least 21 days before the meeting and states the place and time of the meeting, the type of assembly, the agenda, and the shareholder's right to attend, appoint a proxy and vote (Article 91).
Here there is an attendance quorum, counted by voting shares:
| Assembly | Quorum at first meeting | Second and third meetings | Majority for a decision |
|---|---|---|---|
| Ordinary (Article 92) | One quarter of the shares; the bylaws may raise it up to one half | The second meeting is valid whatever the number of shares represented | A majority of the voting rights represented |
| Extraordinary (Article 93) | One half of the shares; the bylaws may raise it up to two thirds | The second needs one quarter; the third is valid whatever the number | Two thirds of the voting rights represented |
In the extraordinary assembly, the majority rises to three quarters of the voting rights represented if the decision is about increasing or reducing capital, extending the company's term, dissolving it before its term ends, merging it with another company, or dividing it (Article 93). The second meeting may be held one hour after the end of the time set for the first, if the notice of the first meeting said so. For the ordinary assembly, the bylaws must also allow this.
A joint stock company has 1,000 voting shares.
Holders of 300 shares attend the ordinary assembly. The quorum is met because this is more than one quarter.
An ordinary decision needs more than half of the votes present, that is 151 votes out of the 300, not 501 out of all the shares.
Every shareholder has the right to attend, even if the bylaws say otherwise, and may appoint any person who is not a board member as his proxy (Article 84). A board member does not vote on assembly decisions about business and contracts in which he has a direct or indirect interest (Article 95).
The bylaws may allow decisions by written resolution, unless any shareholder asks in writing for a meeting. Such decisions need a majority of voting rights for ordinary matters and at least 75% for extraordinary matters. However, electing and removing board members, appointing and removing the auditor, and discussing the annual statements always require a meeting (Articles 100 and 101).
What should the minutes say, and how is a decision challenged?
The minutes are your evidence in any dispute, and it is not enough to write "the decision was passed by majority". In a joint stock company, the law requires the minutes to state the number of shareholders present in person and by proxy, the number of their shares and votes, the decisions, the votes for and against, and a summary of the discussions (Article 97). In an LLC, follow the same method: the shares represented, who approved and who objected, for each decision separately.
A decision that breaches the law or the articles of association can be challenged in court within 90 days of the decision. In an LLC, only a partner who objected in writing, or who could not object after learning of it, may ask for annulment (Article 170). In a joint stock company, it is a shareholder who objected during the meeting or was absent with an acceptable excuse (Article 99). In both cases, the claimant must remain a partner or shareholder throughout the proceedings.
This is general information based on the official Arabic texts of Saudi laws, which prevail over any translation. It is not legal advice for your specific case.
Practical solutions for both sides
If you are the manager, the board, or the majority organising the meeting:
- Send the notice to every partner or shareholder by the required method at least 21 days in advance, and keep proof of sending.
- Attach the statements and documents to the notice, and put each subject in a separate item with the wording of the proposed decision.
- Calculate the quorum and majority for each item according to its type, by shares and not by the number of people present, and exclude the votes of those barred from voting.
- Check the proxies: in an LLC, is the proxy a partner, or do the articles allow him? In a JSC, is he someone who is not a board member?
- Record in the minutes who attended, their percentages, and the votes for and against each decision.
If you are a minority partner or shareholder:
- Check the date and method of the notice, and document it immediately if you did not receive it. A defect in the notice is a ground for challenge.
- Ask in writing for the items that matter to you to be added to the agenda. In a JSC, holders of 10% of the shares may add an item (Article 96).
- If you hold 10%, alone or with others, ask for the assembly to be called yourself when needed.
- Attend in person or by a valid written proxy, and record your objection in the minutes to any decision you think is unlawful. This is a condition for asking to annul it within 90 days.
- Keep a copy of the minutes and of every document presented at the meeting.
If you have a meeting coming up, or a decision was passed and you doubt it is valid, send us the notice, the minutes and the articles of association or bylaws on WhatsApp, and we will work out the quorum with you and explain your position.
Need advice on your own case?
Every case turns on its own facts and documents. Send us a short summary and we'll arrange a session with a licensed Saudi lawyer who will tell you clearly where you stand.
Frequently asked questions
Is the majority counted by the number of partners?
No. It is counted by shares. An ordinary decision in an LLC needs the approval of partners holding more than half of the capital (Article 166), and each partner has votes equal to his number of shares.
I was absent from the meeting. Does my absence stop the decision?
Usually not. In an LLC, the decision is passed if partners holding more than half of the capital approve, even without you. In a JSC, a majority of the votes present is enough once the quorum is met. But in a JSC, absence with an acceptable excuse keeps your right to challenge (Article 99).
Can a decision be made without a meeting?
Yes. In an LLC, by written resolution with the same majority (Article 166). In an unlisted JSC, if the bylaws allow it, except for electing and removing the board, appointing and removing the auditor and discussing the annual statements, which need a meeting (Article 100).
The quorum was not met at the first meeting. What happens?
A second meeting is called. In an LLC, decisions there are passed by a majority of the shares represented. In a JSC ordinary assembly, the second meeting is valid with any number of shares. In an extraordinary assembly, it needs one quarter, and a third meeting is valid with any number.
Can meetings and voting be held remotely?
Yes. The law allows general assemblies and voting by modern technology in LLCs (Article 165) and joint stock companies (Article 84).
Do the JSC extraordinary assembly rules apply to an LLC?
No. The LLC has its own rules in Articles 165 to 172. Amending its articles needs three quarters of the capital, not two thirds of the votes present.
General information, not legal advice. The official Arabic texts of Saudi laws prevail over any translation. Disclaimer