How do the partners of a Saudi LLC decide a capital increase, and what must the resolution state?

When the partners increase the company's capital

A company usually turns to a capital increase to fund an expansion or a new project, because a bank or a contracting party asks for stronger capital, to bring in an investor, or to settle amounts the partners have lent the company. The route differs with the source of the money, and each route has a different effect on the majority, the priority right and the evidence, so settle the route first before drafting any resolution.

• New cash shares: the partners, or some of them, pay new amounts in cash against new shares, and this is the form to which the Companies Law expressly ties the priority right.
• Capitalising retained profit: undistributed profit is moved into capital instead of being paid out, so nobody pays new money, and the resolution here takes the place of the distribution resolution explained in the dividend distribution guide.
• Converting a partner loan into capital: an amount a partner lent the company becomes shares in that partner's name, and the debt is extinguished to the extent of the value of the shares received.
• Admitting a new partner against new shares: the investor subscribes for shares the company issues to them, which differs from buying a share from an existing partner, covered in the share transfer guide.

Before choosing the route, review the articles of association, which may require a higher majority or special procedures, and review the shareholders agreement if there is one, since it often governs the entry of investors and partner funding of the company.

The majority the increase resolution needs

A capital increase in an LLC is an amendment to the articles of association. The Companies Law allows the articles to be amended, including to increase or reduce the capital, with the approval of one or more partners representing at least three quarters of the capital, unless the articles require a higher ratio. What counts here is the share of capital, not the number of partners: a single partner holding three quarters of the capital or more is enough alone if the articles do not require a higher ratio, while three partners out of four are not enough if their combined shares fall below that.

• Any increase: approval of partners representing at least three quarters of the capital, or the higher ratio set in the articles of association.
• An increase by raising the nominal value of the partners' shares: permitted only by unanimity of the partners.
• Suspending the priority right: permitted only by unanimity of the partners.

How the meeting is called or the resolution is passed in writing, and how the vote is recorded, is governed by the articles of association, and the partners' resolutions and general assembly minutes guide explains how to document this in practice. What matters is that the resolution itself shows the percentage of each partner who voted in favour, so that any party reviewing it can see that the required ratio was met.

The priority right to new cash shares and when it may be set aside

If the partners approve a capital increase by issuing new shares, each partner has priority to acquire the shares issued against cash contributions in proportion to what that partner holds in the capital, as the regulations specify. A partner holding a quarter of the capital has priority over a quarter of the new cash shares, and this right protects a partner from having their percentage reduced against their will.

The priority right may be suspended only by unanimity of the partners. If you want to admit an investor who alone subscribes for the new cash shares, the route the Law sets is a resolution approved by all the partners. A partner may not wish to exercise the right, but relying on that partner's silence without a written acknowledgment opens the door to a dispute later. Capitalising profit or a partner loan is not a new cash payment in the plain sense, and whether the priority right applies to it is a point best settled with your lawyer; the safer course in practice is to allocate the new shares in proportion to ownership or to obtain everyone's approval.

Steps to issue the capital increase resolution

1. Review the articles of association and the shareholders agreement: the ratio required for amendment, how meetings are called and votes cast, and any restrictions on admitting a non-partner.
2. Settle the route and amount of the increase, the number of new shares and their nominal value, and the capital after the increase.
3. If the increase is by cash shares, offer them to the existing partners in proportion to their holdings, or document their unanimous agreement to suspend the priority right.
4. Call the partners and pass the resolution with the required majority, and use template F-03 for any accompanying resolution, such as authorising the manager to follow up the procedures.
5. Collect the value of the increase or document its source, and keep the evidence that suits its route.
6. Amend the articles of association to reflect the new capital and the distribution of shares among the partners.
7. File the amendment with the Ministry of Commerce to update the commercial register data, and keep a copy of the resolution and the amended articles in the company's register of resolutions.

How the increase is paid up and evidenced

The resolution alone is not enough: it must be shown that the value of the increase actually entered the company, or that its source actually exists. The evidence differs with the route, and the practical rule is that every amount should be traceable in the company's accounts, not in the partners' personal accounts.

• Cash shares: a bank transfer from the partner to the company's own account, with a statement that it is against the increase shares.
• Capitalising profit: approved financial statements showing the available retained profit, and the partners' resolution to capitalise it instead of distributing it.
• A partner loan: the loan agreement and the company's accounting records showing the balance, and the lending partner's acknowledgment that the debt is extinguished to the extent of the shares' value.
• A new partner: evidence of the subscription and payment, and the new partner's accession to the shareholders agreement if there is one.

As for the documents the Ministry of Commerce requires when the amendment is filed, and whether an accountant's report or a particular bank certificate is needed, check them on the ministry's official platform at the time of filing; we do not list them here as a fixed requirement because procedures may change.

What the increase resolution states, section by section

Write the resolution so that someone who did not attend the meeting can understand it, such as the bank, the Ministry of Commerce or a partner joining years later. A clear resolution needs no explanation, while an incomplete one may be returned or challenged.

• Company details: the name, the commercial register number, and the current capital and number of shares.
• The date of the resolution and how it was passed, and the names of the participating partners and each one's ownership percentage.
• Proof that the required ratio was met: three quarters of the capital or the higher ratio in the articles, or unanimity where required.
• The amount of the increase and the capital after it, and the number of new shares and their nominal value.
• The route of the increase: cash, capitalising profit, converting a partner loan, or subscription by a new partner.
• The position on the priority right: the shares offered in proportion to ownership, or the partners' unanimous agreement to suspend the right.
• The ownership table after the increase: each partner's name, number of shares and percentage.
• The method of payment and the date the partners agree for it, and the evidence of payment.
• Authorisation of the manager or a named person to amend the articles and follow up the procedures with the Ministry of Commerce.
• The signatures of the approving partners.

Amending the articles of association and updating the commercial register

Because the capital and the distribution of shares are stated in the articles of association, the increase is not complete with the resolution alone: the articles themselves must be amended to state the new capital, the number of shares, their nominal value and their distribution among the partners. The amendment is then filed with the Ministry of Commerce so that the commercial register data reflect the new position. The platform steps, fees and any filing period should be checked on the ministry's official platform, and we do not state here any figure we have not verified.

Under the Commercial Register Law of 2025 the register is now permanent and no longer renewed, but it requires an annual confirmation of its data, so make sure the capital and the partners in the register match what you resolved before the confirmation falls due. If a new partner has joined, update the shareholders agreement, and if management changes as a result of the increase, refer to the board of managers resolutions guide.

Frequently asked questions