Liability Claims Against the Board of Directors under the Saudi Companies Law

Liability claims protect the company's rights and compensate a partner's or shareholder's own loss. Articles 29 and 30 of the Saudi Companies Law set three routes: a claim brought by the company, a claim a partner or shareholder pursues on the company's behalf when it does not act, and a personal claim for the shareholder's own loss. They also address the effect of a discharge and the limitation periods.

Written by: Khaled ElnaggarDirector of USUS Law FirmLast updated: 27 October 2026

The company's claim

The company may sue the manager or board members for breaching the Law, the articles of association or bylaws, or for errors, negligence or failure in performing their work that harm the company: for example abuse of powers, failing to protect company assets or collect its rights, exceeding authority, using the company's name for personal deals, unlawful competition, using its funds without right, or misstating its accounts. A breach alone is not enough: there must be harm to the company and a causal link. The partners, general assembly or shareholders decide to sue and appoint who represents the company, which need not be the chairman, who may himself be a defendant.

A shareholder pursuing the company's claim

Conditions: holding at least 5% of the capital alone or with others (or a lower bylaw threshold); the company has not sued; the main purpose is the company's interest; a sound basis; good faith; being a partner or shareholder when suing; and notifying the manager or board at least fourteen days before filing. The company's approval is not required, and the bylaws cannot bar or condition this right. Any compensation awarded belongs to the company alone.

The shareholder's personal claim

A shareholder who suffers a personal loss from a board member's fault may sue for it, proving fault, personal loss and causation: for example withholding the shareholder's dividends, publishing false information to harm them, blocking their vote or access to the company's books, or failing to call the general assembly.

Discharge and limitation

A discharge approved by the partners, general assembly or shareholders does not prevent these claims (Art. 30). Except for forgery and fraud, a claim is not heard after five years from the end of the financial year in which the harmful act occurred, or three years from the end of the manager's or member's term, whichever is later.

Frequently asked questions

Does a board discharge prevent a liability claim?

No. Under Article 30 of the Companies Law, a discharge does not prevent liability claims.

What stake does a shareholder need to pursue the company's claim?

Five percent of the capital, alone or with others, or a lower threshold in the bylaws, with fourteen days' prior notice to the board.

Usus Law Firm handles board liability claims, shareholder disputes and corporate governance. See our commercial and corporate lawyer in Riyadh.

This article is general legal information and is not a substitute for advice on your specific case. Court proceedings in Saudi Arabia are in Arabic; the official Arabic text of each law prevails.