Corporate · Legal glossary
Memorandum of associationIn Arabic: عقد التأسيس
The difference between themDefinition
A memorandum of association (عقد التأسيس) is the written constitution of a company: the partners or founders sign it, and it states the name, the object, the capital and how the company is run. It is not a commercial registration, and it is not a partnership agreement between two people who have not incorporated.
In Saudi Arabia some companies do not have a memorandum at all. A joint-stock company, a simplified joint-stock company, and a single-person limited liability company have articles of association (نظام أساس) instead. In the UAE the memorandum is in Arabic, and it does not bind third parties until it is in the commercial register.
Saudi Arabia
The Companies Law, Royal Decree No. M/132 of 1/12/1443H, gives every company a memorandum except the joint-stock company, the simplified joint-stock company, and the single-person limited liability company, which have articles (نظام أساس). In that single-person company, a reference to the memorandum means the articles. The document is in Arabic, a translation may be attached, and the Ministry of Commerce publishes models.
It must be in writing or it is void, and it cannot be set up against a third party until it is in the commercial register. An omitted particular is the only part that fails against outsiders. Whoever causes the failure to file is jointly liable for the loss. A limited liability company is formed by one or more persons; the company alone owes its debts, and a partner is liable only up to their share. Article 158 requires the memorandum to cover the partners, the name, the head office, the object, the capital and how it is divided, payment of the shares, management, transfer, decisions, profit and loss, the financial year and winding-up.
United Arab Emirates
Article 14 of Federal Decree-Law No. 32 of 2021 requires the memorandum, and any amendment, to be in Arabic and attested by the competent authority, or it is void. A foreign-language version yields to the Arabic. Attestation is in person or by electronic signature, and before a notary in the cases the authority specifies. Partners may rely on that nullity against each other, not against a third party.
Under Article 15 it takes effect against third parties only once it is in the commercial register. The company has 15 business days to notify a change of name, address, capital, number of shareholders or legal form. Managers or directors are jointly liable for loss caused by a failure to register. A limited liability company has two to fifty partners, or a single owner, and liability is limited to the capital. The government portal requires a memorandum for a limited partnership, a limited liability company, and a public or private joint-stock company.
The rules that apply to a specific matter depend on the state, any free zone involved and the current text of the law, so check the official source before relying on them.
Practical points
- A Saudi single-person limited liability company gets articles, not a memorandum. The name on the draft does not change the filing.
- File it. In both countries an unregistered memorandum is weak against outsiders.
- Keep the Arabic text as the operative one when a translation is attached.
Common mistakes
- Using a partnership agreement as the memorandum. It does not create a company.
- Leaving a Saudi limited-liability memorandum without the transfer, profit and management clauses Article 158 lists.
- Attesting an English-only UAE memorandum. Article 14 makes a memorandum that is not in Arabic, or not attested, void.
Questions lawyers actually get
Which Saudi companies have articles instead of a memorandum?
The joint-stock company, the simplified joint-stock company, and the single-person limited liability company. Every other company formed under the Companies Law has a memorandum.
When does a UAE memorandum bind third parties?
Once it is entered in the commercial register of the competent authority. An unregistered memorandum, or an unregistered particular, has no effect against third parties.
Does signing a partnership agreement incorporate the company?
No. The company exists under the companies law of the country where it is formed, and the memorandum or articles are filed in the commercial register.
What must a Saudi limited-liability memorandum contain?
Article 158 lists the partners, the name, the head office, the object, the capital and how it is divided, payment of the shares, management, transfer, decisions, profit and loss, the financial year and winding-up, among other particulars.
Sources
Checked against these official texts. This is general information, not legal advice. The Bureau of Experts site timed out on a direct connection from this network; the Companies Law text was retrieved from that same official URL. Qatar, Bahrain, Kuwait and Oman are not summarized.
- Saudi Companies Law, Royal Decree No. M/132 of 1/12/1443H (Bureau of Experts)https://laws.boe.gov.sa/BoeLaws/Laws/LawDetails/a8376aea-1bc3-49d4-9027-aed900b555af/1
- UAE Federal Decree-Law No. 32 of 2021 on Commercial Companies (official text)https://uaelegislation.gov.ae/en/legislations/1542/download
- UAE government portal (u.ae), steps to start a business on the mainlandhttps://u.ae/en/information-and-services/business/Doing-business/doing-business-on-the-mainland/steps-to-start-a-business-on-the-mainland