Commercial court confirms ownership of 500 shares to an heir by force of law

In a legal move that strengthens the legislative and commercial environment in Saudi Arabia, a commercial court issued a final ruling with significant implications for the business sector and family businesses. The ruling establishes the ownership of 500 shares in a limited liability company by an heir, based on the force of law and official documents, thus putting an end to disputes that may arise regarding the transfer of shares in companies after the death of partners.

Details of the lawsuit and supporting documents

The case stems from a lawsuit filed by a citizen seeking his legal and legitimate share of his deceased ancestor's inheritance. The deceased had originally owned 2,000 shares in the capital of the defendant company. The plaintiff based his claim on compelling documents, most notably a certificate of inheritance that precisely defines the legal shares, and the company's articles of incorporation, which document the deceased's original ownership of the shares. Given the strength and clarity of these documents, the defendant company was unable to present any substantive defenses to refute the plaintiff's claim or challenge the validity of the submitted documents, thus firmly establishing the plaintiff's legal and procedural position.

Reliance on Sharia and the corporate system

The court based its ruling on two fundamental pillars, combining established Islamic legal principles and legal texts. From an Islamic legal perspective, the court applied the rules of Islamic inheritance adopted in the Kingdom, which ensure the equitable distribution of the estate. The plaintiff's share was calculated from the total shares of his deceased relative according to Islamic inheritance law, ultimately resulting in his entitlement to 500 shares.

From a procedural standpoint, the ruling was clearly based on Article 212 of the Companies Law, which explicitly stipulates that a partner's shares in a limited liability company are transferred to their heirs upon death. The court affirmed in its reasoning that this transfer is automatic unless the company's articles of incorporation expressly stipulate otherwise (such as requiring the redemption of the shares and payment of their value to the heirs). This exception was not present in this case, thus making the transfer of shares in kind mandatory and obligatory.

The importance of governance and its impact on the business environment

This ruling is of paramount importance, extending far beyond the individual case itself. It comes within the context of the significant development of the Kingdom's judicial system and its alignment with Vision 2030, which aims to create a safe and transparent investment environment. Protecting the rights of minority shareholders in companies and ensuring the smooth transfer of ownership to heirs is crucial for the sustainability of family and private businesses, which represent a broad and influential segment of the national economy.

This ruling confirms to investors and partners that the commercial judicial system in the Kingdom stands as a guardian of rights, and that the regulatory provisions in the Companies Law are activated and enforced, which reduces legal risks and encourages entering into reassuring commercial partnerships, thereby strengthening confidence in the commercial judiciary as a reference that guarantees justice.

At the conclusion of the sessions, the Commercial Court resolved the dispute by issuing its final ruling confirming the plaintiff’s ownership of the shares. This ruling serves as a title of truth and an executive document guaranteeing the plaintiff the exercise of all his rights as a partner in the company, and thus the court closes a thorny file with a ruling that establishes the principles of effective justice.