Are LLC Partners Liable for Company Debts in Saudi Arabia?

A building materials supplier is owed SAR 450,000 by a contracting company that has stopped paying. He sends a warning letter to the three partners by name and threatens enforcement against their personal accounts. One partner says: "I am a partner in a limited liability company. You have no claim against me." He may be right, or he may not. The answer depends on three things: the form of the company, what he personally signed, and how the company was managed and wound up.

The short answer: in a Saudi limited liability company (LLC), the company alone is liable for its debts, and a partner risks only his share in the capital. He becomes personally liable only in specific cases: a personal guarantee he signed, fault as a manager, or winding up the company in breach of the Bankruptcy Law. In a general partnership, the rule is the opposite.

Is an LLC's money separate from the partners' money?

Yes. Article 156 of the Companies Law makes the financial liability of an LLC separate from the liability of each partner. The company alone is liable for the debts arising from its activity, and a partner is liable for them only up to the amount of his share in the capital. The same rule applies to a company owned by one person.

In practice, "up to his share" means the partner loses what he put into the company and no more. If he has not paid the full value of his share, he owes the company the rest (Article 15), and this amount can become part of the company's assets from which creditors are paid. Weak assets or losses in the company do not move its debt to the partners.

When is a partner personally liable for LLC debts in Saudi Arabia?

The protection above covers only the capacity of a partner. Other capacities and acts open the door to a personal claim:

• A personal guarantee: if the partner signed as guarantor for the creditor, he committed to pay the company's debt if the company does not pay it (Article 578 of the Civil Transactions Law). This is a separate obligation, and the nature of the company does not cancel it.
• Fault as a manager: a manager must compensate third parties for damage caused by breaching the law or the articles of association, or by his errors and negligence (Article 28). If the partner is a manager, he may be liable in that capacity once fault and damage are proven.
• Unlawful liquidation: if the company ends and its assets are not enough to pay its debts, an application must be made to the court to open a liquidation procedure under the Bankruptcy Law. If the company is liquidated in breach of this, the partners and managers are jointly liable for any remaining debt (Article 244).
• Dissolution by declaring no activity: Article 93 of the Implementing Regulations allows a company that never carried out any activity to be dissolved by a unanimous decision, on condition that the partners jointly undertake to pay from their own money any debts that may appear.

Signing a contract in the company's name as manager does not mean a guarantee. What matters is the wording of the document: did he sign as the company's representative, or did he sign a separate clause in which he binds himself?

A contracting LLC has capital of SAR 300,000 and three partners with equal shares, fully paid. It owes the supplier SAR 450,000.

One partner signed a separate clause in the supply contract personally guaranteeing the company up to SAR 200,000.

The supplier claims the full amount from the company, and claims against the guarantor partner up to SAR 200,000 under the guarantee.

The other two partners cannot be claimed against from their own money, unless one of them is proven to be at fault as a manager, or the company is liquidated in breach of the Bankruptcy Law.

How is a general partnership different?

In a general partnership (sharikat tadamun), the partners are personally liable with all their assets, and jointly, for the company's debts and obligations (Article 35). But the creditor cannot go directly to them. Article 48 requires that the debt against the company is proven by a final court judgment or an executive instrument (sanad tanfidhi, a document enforceable directly at the Enforcement Court), that the company is formally notified to pay, and that payment cannot be obtained from it. A partner who pays can recover from the others in proportion to what he paid for each one's share.

Does a partner escape the debt by leaving the company?

In a general partnership, Article 45 sets out the rule. A partner who withdraws or is expelled is not liable for debts that arise after his withdrawal or expulsion is recorded and published. But he remains liable for earlier debts unless the other partners and the company's creditors release him. A partner who transfers his share is not liable for the company's debts unless the creditors object to his release within 30 days of the company notifying them. In that case, he remains jointly liable for the earlier debts.

In an LLC, a share is transferred only when it is recorded in the Commercial Register (Article 25). Selling it does not affect a personal guarantee the seller signed for a bank or landlord, because his agreement with the buyer does not create an obligation on the creditor (Article 99 of the Civil Transactions Law). A release must come from the creditor himself.

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 creditor:

• Start with the debtor's Commercial Register: is it an LLC or a general partnership? The answer decides who you can claim against.
• Check your file for a personal guarantee or a promissory note the partner signed in his personal capacity.
• In a general partnership, first obtain a judgment or an executive instrument against the company and notify it formally, then claim against the partners.
• If you learn the company was liquidated or deregistered while your debt is unpaid, ask about the liability of the partners and managers under Article 244.
• Do not agree to release a partner who transferred his share in a general partnership without studying it. The objection period is 30 days from the notice to you.

If you are the partner being claimed against:

• Collect the articles of association, the Commercial Register and proof that you paid the full value of your share.
• Review every document you signed: did you sign as the company's representative, or as a guarantor yourself?
• If the company's losses reach half of its capital, the manager must call the assembly within 60 days to decide whether it continues or is dissolved (Article 182).
• Do not liquidate a company whose debts exceed its assets by private agreement. Follow the Bankruptcy Law procedures so you do not become jointly liable.
• If you sell your share, ask every creditor you guaranteed for a written release.

The line between the company's money and your own is drawn by what you signed and how the company was managed and closed. Send us the claim you received, or the debt document you hold, on WhatsApp, and we will tell you who really owes the debt.