How to Remove an LLC Manager in Saudi Arabia: Majority and Steps

Three partners own a contracting company. One of them was named manager in the articles of association five years ago. The accounts are late, contracts are signed without the others knowing, and the manager says: "My name is in the articles. No one can remove me." This belief is common, but it is wrong.

The short answer: the partners may remove the manager of a Saudi limited liability company (LLC) at any time, whether he was appointed in the articles of association or in a separate contract (Article 164 of the Companies Law). The decision needs the approval of partners holding more than half of the capital, unless the articles require more, and a manager who is a partner does not vote on his own removal. If a decision cannot be reached, partners holding one quarter of the capital may ask the court to remove him.

Can an LLC manager be removed before his term ends?

Yes. The Companies Law allows the partners to remove the manager or managers of an LLC, and Article 63 of the Implementing Regulations confirms this includes a partner-manager appointed in the articles of association or in a separate contract. Having his name in the articles does not protect him.

But removal does not happen by a letter from one partner. It needs a valid decision under the law and the articles, and then the change must be completed through the required procedures.

Removing a manager is not the same as removing him from the company. If he is a partner, ending his management does not transfer his share to anyone or take away his ownership.

Who votes on removing the manager?

If the manager is a partner, he may not vote on the decision to remove him. So the minutes should show that the decision concerns his removal and that his vote was not counted in the result. The ban applies only to this decision, not to the company's other decisions.

It is better to vote on the removal separately from the appointment of a replacement or a change of powers, so the result of each decision is clear.

What majority is needed to remove an LLC manager?

Article 63 of the Implementing Regulations makes the removal decision subject to the majority required for valid partners' decisions, taking the articles of association into account, even if the manager was appointed in the articles. So the special majority for amending the articles is not needed.

Votes are counted by shares, not by the number of people. The decision needs the approval of partners holding more than half of the capital, unless the articles require more. If this is not reached in the first round, the partners are called to a meeting where decisions are passed by a majority of the shares represented (Article 166). If the manager who cannot vote holds a significant share, the way the majority is calculated after excluding his vote needs careful review before the decision is adopted.

A company has capital of SAR 300,000. Salem owns 60%, the manager owns 25%, and Fahd owns 15%.

The manager's vote does not count in the decision to remove him. Salem alone holds more than half of the capital, so the decision is valid with his approval even if Fahd objects, unless the articles require a larger majority.

If the shares were closer and the majority was not reached in the first round, the partners would be called to a second meeting where the decision is passed by a majority of the shares represented, unless the articles say otherwise.

How do you prepare the removal decision?

• Review the articles of association and the manager's appointment decision: who can call the meeting, how notice is given, and what majority is required.
• Send the notice to all partners at least 21 days before the meeting, by registered letter, by technology, or by the method in the articles. Partners holding 10% of the capital may ask for a meeting to be called (Article 165).
• Put the removal and the appointment of a replacement clearly on the agenda, with the candidate's name and powers.
• Record attendance, shares, votes and objections in the minutes, and keep them in the company's register.
• State the effective date in the decision, and arrange the handover of contracts, accounting files, bank accounts and electronic access.

When should you ask the court to remove the manager?

Article 164 allows one or more partners holding at least one quarter of the capital to ask the Commercial Court to remove the manager. This route is usually used when an internal decision cannot be reached. The percentage is a condition for filing the request, not a guarantee that it will be accepted. Two partners holding 30% can file the request, but the manager is removed only if the court rules so.

The request needs reasons, facts and documents, not just "we have lost trust in the manager". Arrange the documents in an order that shows the disputed act, its date and its link to the company's management.

What happens after the manager is removed?

The partners must appoint one or more managers to replace the removed manager (Article 164). If the company has a single manager and the position becomes vacant, a replacement must be appointed within 15 days of learning of this, and the auditor or any partner may call the assembly for this purpose (Article 163).

Then record the change in the Commercial Register, because a decision to appoint or change the manager, or to limit his powers, has no effect against third parties until it is recorded (Article 162). Update the company's details with the banks and authorities it deals with, and cancel the former manager's access to electronic systems.

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 a partner who wants to remove the manager:

• Start by reading the articles of association to find the required majority and the method of calling the meeting.
• Ask for a partners' meeting with a clear agenda that includes the removal and the appointment of a replacement.
• Prepare the replacement manager, his powers and a plan for handing over accounts and files before the meeting.
• If the majority cannot be reached and you hold one quarter of the capital, consider asking the court for removal with a well-organised file of evidence.

If you are the manager they want to remove:

• Check that the notice and the majority are valid, and that your vote was excluded only from the decision on your removal, not from others.
• Review your management contract and any amounts due to you when it ends.
• Hand over management with a signed handover record that states what you handed over and when, so you are not held responsible for what happens after.
• If you believe the decision breaches the law or the articles, record your objection in writing immediately and watch the deadline to challenge it.

Every removal case has its own details in the articles and the shareholdings. Send us the articles of association, the shareholding percentages and what has happened on WhatsApp, and we will explain the correct first step.