Remove a Partner from an LLC in Saudi Arabia: What the Law Allows

Three partners meet and write a two-line minute: "We have decided by majority to remove the fourth partner from the company as of today." The fourth partner owns 20% and manages the branch. The real dispute is about how he handles purchasing. This minute may be enough to remove him from management, but it does not transfer his share to anyone. The reason is that Saudi law separates owning a share from holding a position, and it treats each company form differently.

The short answer: only in a general partnership (sharikat tadamun) can partners ask the court to expel a partner. In a limited liability company (LLC), the majority cannot take away a partner's ownership by a vote. They can remove him as manager, buy his share by agreement, or use a drag-along clause if the articles of association contain one.

Is there such a thing as "expelling a partner" under Saudi law?

Yes, but in a general partnership. Article 46 of the Companies Law allows partners to agree in the articles of association on a procedure for expelling partners. If the articles say nothing, the numerical majority of partners may apply to the court to expel one or more partners when there are legitimate reasons, and the company continues among the remaining partners.

Note that this is an application to the court, not an internal decision that takes effect by vote. After expulsion, it must be recorded and published in the Commercial Register, and it has no effect against third parties before that. The expelled partner does not leave empty-handed: under Article 49, if there is no agreement on the value or the method of valuation, his share is valued by an accredited valuer, who reports the fair value of his share on the date of expulsion.

Can the majority expel a partner from an LLC in Saudi Arabia?

The LLC chapter of the Companies Law has no provision like Article 46. So the majority cannot cancel a partner's ownership by a decision, and cannot ask the court to expel him by analogy with a general partnership. The partners have other tools, each with its limits:

• Removing the partner from management: if he is a manager, the partners can remove him with the approval of those holding more than half of the capital, and he does not vote on his own removal (Article 164 of the Companies Law and Article 63 of the Implementing Regulations). Partners holding one quarter of the capital can also ask the court to remove him.
• Buying his share by agreement: the share can be sold to the other partners or to a third party under Article 178, or the company can buy it if its articles of association allow this (Article 180).
• A drag-along clause: with the approval of partners holding 90% of the capital, the articles of association may give the majority a right to force the minority to accept an offer from a good-faith buyer to purchase all the company's shares at the same price and on the same terms (Article 181).

A drag-along clause is not a tool to push out one particular partner. It is designed for selling the whole company to one buyer on equal terms for everyone. It does not let the majority pick a partner and force him to sell his share to them.

Can the company stop a partner's profits to put pressure on him?

No. Article 23 states that any agreement to deprive a partner of profit is treated as if it does not exist. Removing a partner from management, or stopping him from entering the company's premises, does not affect his right to his share of the profits that the general assembly decides to distribute.

Some people confuse this with Article 15. If a partner fails to pay his capital contribution on time, the company may suspend the rights attached to his share, such as profits and voting, or demand that he pays, and it can also claim compensation. This is a penalty for not paying the contribution. It is not a way to punish a partner for a disagreement about management.

What if the partner is really harming the company?

Identify the act precisely: signing beyond his authority, contracting with a business he owns without authorisation, competing with the company, or using its information. Each act has its own remedy: withdrawing his powers, removal, a liability claim under Articles 28 and 29, and a request to cancel the contract and return the benefit under Article 27. In urgent cases, Article 36 of the Commercial Courts Law allows requests such as securing specific documents or appointing a judicial custodian (receiver).

These routes deal with the harm and leave ownership as it is. If both sides want to end the partnership itself, the practical route is a clear exit deal: the share price in one clause, mutual claims in another, and release from guarantees in a third.

In an LLC, the fourth partner owns 20% and the other three own 80%. The three vote to remove him from managing the branch and record the decision in the Commercial Register. The removal is valid.

His 20% share stays as it is, and he is entitled to its portion of any profits the general assembly decides to distribute.

If they want him out of ownership, they offer to buy his share based on an accredited valuer's report. If he refuses, he remains a partner. A drag-along clause under Article 181, if it exists in the articles, can only be used when a buyer offers to purchase all the company's shares.

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 partners who want a partner to leave:

• Check the company form first. The Article 46 route is only for general partnerships.
• If the problem is how he manages, remove him with the correct majority and record the decision in the Commercial Register.
• Offer to buy his share based on an accredited valuer's report. It is the shortest way to end the partnership.
• Do not stop his profits. This strengthens his position and weakens yours in court.
• If you want a drag-along clause for the future, remember it needs the approval of 90% of the capital.

If you are the partner they want to remove:

• Do not treat an "expulsion" minute as if it ended your ownership. Check the Commercial Register and the articles of association.
• Keep your removal from management, if valid, separate from your share and your profits.
• If you are cut off from information, ask to inspect the company's records and documents under Article 171.
• If the general assembly passes a decision that unlawfully affects your rights, object in writing and count the 90-day deadline.
• If you receive a purchase offer, ask for an independent valuation and do not sign a general waiver of "all rights" without listing them.

The outcome in these disputes depends on the company form and the wording of its articles. Send us the articles of association and any minutes on WhatsApp, and we will explain what each side can actually do.