Legal Guides
In Kind Shares of Joint Stock Companies

The capital of a joint stock company is divided into shares of equal value which are transferrable as provided in Article 52 of the Companies’Act 1437H. Whoever signs the company’s memorandum of association or an application for its incorporation, or provides a share in kind upon its incorporation, or has actually participated in its incorporation, is deemed a founder of the company under Article 56 of the Act.

Article 5 of the Companies’ Act states that the shareholding of a partner may either be in cash or in kind; it may also be payment for work.  However, if there are in kind shares, the incorporation application shall be supplemented with a report to be prepared by one or more licensed expert or evaluator which sets forth a fair value assessment of these shares.

 

The founders must deposit a copy of the in kind shares valuation report at the Company’s headquarters at least fifteen (15) days prior to convening the shareholder meeting, and any interested party is entitled to review the report.  The report must then be presented to the shareholders at their meeting for consideration. If the shareholders decide that the consideration for the in kind shares should be reduced, the holders of those shares must agree to the reduction during the meeting. However, if they refuse to agree to the reduction, the company’s memorandum of association shall be deemed invalid as to all parties under Article 61 of the Companies’ Act.