Everything About General Partnership Under the Saudi Legal System 2026
A General Partnership is one of the “partnership companies” that relies primarily on the personal consideration and mutual trust among partners. It is often the preferred legal structure for family businesses, as family members collaborate in a commercial venture with the aim of generating profit.
In this article, Al-Salamah Law Firm & Legal Consultations explains how to establish a General Partnership in Saudi Arabia.
Table Of Content
What Is a General Partnership?
A General Partnership is the optimal model for partnership companies based on personal consideration, as it brings together individuals bound by a special relationship. It is therefore the most suitable legal structure for family entities seeking to establish a company for a limited period and with a moderate budget, without large-scale expansion.
This structure is particularly appropriate for small and medium-sized family businesses and ventures formed among individuals with strong personal or professional relationships. Partners conduct business collectively and are jointly liable under the company’s name.
Definition of a General Partnership
Article (35) of the New Companies Law (1443 AH) defines a General Partnership as:
A company established by two or more natural or legal persons who are personally and jointly liable, with all their assets, for the company’s debts and obligations, and in which each partner acquires merchant status.
Requirements for Establishing a General Partnership
Article (36) of the Companies Law stipulates that the Articles of Association of a General Partnership must, in particular, include the following:
- Names and details of the partners.
- Company name.
- Head office of the company.
- Company objectives.
- Company capital and its distribution among the partners, with adequate identification of each partner’s contribution and its due date.
- Company term, if any.
- Company management.
- Partners’ resolutions and the quorum required for their adoption.
- Method of distribution of profits and losses among the partners.
- Start and end dates of the fiscal year.
- Company dissolution.
- Any other provisions agreed upon by the partners, provided they do not conflict with the Law.
Conversion of a General Partnership into a Sole Proprietorship
To change the legal form of a General Partnership into a Sole Proprietorship, the approval of all partners is required.
Previously, converting a company (as an independent legal entity) into a Sole Proprietorship (which is legally tied to the owner’s national identity) was difficult. However, the New Companies Law has simplified this process by allowing the deregistration of the partnership and the establishment of a Sole Proprietorship, which is not considered a separate legal entity from its owner.
This is typically achieved by liquidating the General Partnership or transferring its assets and trade name to the Sole Proprietorship, following the approval or withdrawal of all partners, leaving one remaining partner.
To complete the conversion, the following requirements must be met:
- Approval of all partners.
- Settlement of debts or consent of creditors.
- Continuity of rights and obligations upon conversion to another legal form.
- Publication of the conversion decision and amendment of the Articles of Association via the Ministry of Commerce platform.
It is always advisable to consult Al-Salamah Law Firm & Legal Consultations when taking this step to ensure proper transfer of assets and tax (Zakat and income) obligations without penalties and to guarantee legal compliance.
Termination of a General Partnership Agreement
A General Partnership agreement is terminated by ending the relationship between partners, which results in the cessation and dissolution of the company. This may occur by mutual agreement or due to a legal cause such as death, bankruptcy, achievement of the company’s purpose, or any other legally recognized reason. The causes for termination may be general or specific.
Withdrawal of a Partner from a General Partnership
Article (46) of the Companies Law sets out the conditions for the withdrawal of partners from a General Partnership as follows:
- Unless otherwise stipulated in the Articles of Association, a partner may withdraw unilaterally, provided that the remaining partners are notified at least sixty (60) days prior to the specified withdrawal date.
- The Articles of Association may specify procedures for the expulsion of partners. If not, a numerical majority of partners may apply to the competent judicial authority to expel one or more partners for legitimate reasons, while the company continues among the remaining partners.
- The withdrawal or expulsion must be registered and published in the Commercial Register, and it shall not be effective against third parties unless duly registered and published.
- The competent judicial authority may, upon the request of one or more partners, decide to dissolve the company if its continuation becomes impossible.
What Happens After a Partner Withdraws from a General Partnership?
Article (45/2) of the New Companies Law provides that:
If a partner withdraws from the company or is expelled therefrom, he shall not be liable for debts arising after the registration and publication of his withdrawal or expulsion in the Commercial Register, but shall remain liable for debts incurred prior thereto, unless released by the consent of the remaining partners and the company’s creditors.
Are you considering forming a general partnership, or are you already a partner in one?
Contact us now to get an accurate legal assessment of your current situation, or let us help you establish or restructure your company in a way that protects your rights and helps you avoid future disputes.
Assignment of a Share in a General Partnership
Article (45/3) of the Companies Law provides that:
If a partner assigns his share, the assignee shall be liable to the company’s creditors for debts incurred both prior to and after his admission. The assignor shall not be liable to the creditors unless they object to his release from liability within thirty (30) days from the date they are notified by the company. In case of objection, the assignor shall remain jointly liable for debts incurred prior to the assignment.
For drafting and preparing detailed share assignment agreements and understanding the applicable conditions, you may contact Al-Salamah Law Firm & Legal Consultations, where our experienced legal team ensures the protection of all partners’ rights.
General Partnership Agreements
To obtain a General Partnership agreement, you may contact Al-Salamah Law Firm & Legal Consultations, where our professional team specializes in drafting and reviewing partnership agreements.
Saudi General Partnership Agreement
The Ministry of Commerce in Saudi Arabia provides a standard template for a General Partnership agreement. Al-Salamah Law Firm represents clients in obtaining official copies of such agreements.
Are you thinking about converting your general partnership into a sole proprietorship?
Contact us now and let us assess your company’s situation and carry out the conversion in a way that protects you from previous liabilities and ensures compliance with official authorities.
Amendment of a General Partnership Agreement upon the Death of a Partner
In the event of the death of a partner, the company does not automatically dissolve. The Articles of Association may provide that the company continues with those heirs of the deceased partner who wish to remain, even if they are minors or legally prohibited from practicing commercial activities.
In such cases, the minor heirs or legally prohibited persons shall not be liable for the company’s debts beyond their respective shares in the deceased partner’s capital contribution. The company must be converted within one year from the date of death into a Simple Limited Partnership, in which the minor or legally prohibited person becomes a limited partner. Otherwise, the company shall be deemed dissolved by operation of law, unless the minor reaches legal age or the prohibition is lifted within that period and elects to become a general partner.
If, following the death, withdrawal, or expulsion of a partner, only one partner remains, that partner shall be granted ninety (90) days to rectify the company’s status by admitting another partner or converting it into another legal form under the Companies Law, failing which the company shall be dissolved by operation of law.
Difference Between a General Partnership and a Simple Limited Partnership (Companies Law 1443 AH)
| Aspect | General Partnership | Simple Limited Partnership |
| Concept | A company established by two or more persons jointly and personally liable for debts | A company consisting of at least one general partner and one limited partner |
| Partners | All partners are general partners | Two categories: general and limited partners |
| Liability | Unlimited personal and joint liability | General partner: unlimited liability; Limited partner: liability limited to capital contribution |
| Management | All partners, unless a manager is appointed | General partners only |
| Merchant Status | General partners acquire merchant status | General partner: yes; Limited partner: no |
Questions & Answers
What is a General Partnership?
A company established by two or more persons who are personally and jointly liable for all company debts and obligations and who acquire merchant status.
What happens after a partner withdraws?
The withdrawing partner is not liable for debts incurred after registration of withdrawal but remains liable for prior debts unless released.
What are the requirements to establish a General Partnership in Saudi Arabia?
Valid commercial registration if a partner is a legal entity.
Minimum age of 18 years (guardianship deed required for minors).
Partners must not be government employees.
Additional licensing requirements for professional companies.
What documents are required?
What docuLegal authorization if a partner is a governmental or non-profit entity.
Approval from the Saudi Central Bank if the activity requires it.ments are required?
Is a General Partnership suitable for family businesses?
Yes. Due to its structure and advantages, it is considered one of the most suitable options for family enterprises.
Do not risk the foundation of your business or its incorporation procedures. Contact us today for a comprehensive legal assessment, and we will assign the most suitable lawyer to ensure a compliant and sound launch under Saudi law.
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