⚖️ Laws and Regulations

1. Which of the following is NOT a characteristic of a legal rule:

1. It applies to everyone who meets its conditions
2. It is binding, backed by the coercive power of the State
3. It is addressed to a named person in a single dispute
4. It is phrased in abstract terms, not tied to a particular case

A legal rule is general, abstract and binding: it addresses everyone in the same position, is framed without naming particular persons or cases, and is backed by the coercive power of the State. A rule written for one named person and one dispute lacks generality and abstraction, so it is the statement that is NOT a characteristic. The other three statements each describe a recognised characteristic.

2. As a general principle of the application of law in time, a new law is applied to:

1. events occurring after the law enters into force
2. events occurring after the law is signed
3. events occurring before the law enters into force
4. events that the court selects case by case

As a general principle, a law governs facts arising after it enters into force and is not applied to past events, unless it expressly provides otherwise. Signature of a text before its effective date does not make it applicable earlier. Applying a law to events that happened before its entry into force is retroactivity, which is the exception, and the principle leaves no room for a case-by-case choice by the court.

3. Private law is the branch of law that:

1. organises the structure and powers of State authorities
2. defines offences and the penalties attached to them
3. regulates relations between States and international bodies
4. governs relations among individuals as private persons

Private law governs relations among individuals acting as private persons, and civil and commercial law belong to it. The organisation of State authorities is the subject of constitutional and administrative law, offences and penalties belong to criminal law, and relations between States belong to public international law; these are branches of public law.

4. Mr Faisal has completed 18 years of age by the Hijri calendar, although he is not yet 18 by the Gregorian calendar. He has full mental capacity and has not been interdicted. Under the Civil Transactions Law, he is:

1. a partially incompetent person, as a minor with discernment
2. a fully competent person, having reached the age of majority
3. an incompetent person, as a person who is non-discerning
4. a person under interdiction until a court confirms his capacity

Article 12 of the Civil Transactions Law defines a fully competent person as one who has reached the age of majority, has full mental capacity and is not interdicted, and it sets the age of majority at 18 years by the Hijri calendar (text in force on 2027-03-21). Mr Faisal meets the three conditions, so his Gregorian age is irrelevant. A minor with discernment (Article 14 of the Civil Transactions Law) has not reached the age of majority, and an incompetent person (Article 13) is non-discerning because of young age or idiocy. Interdiction needs a ground such as being a spendthrift or imprudent, which the facts exclude.

5. Under the Civil Transactions Law, the age below which a person is deemed non-discerning, and therefore incompetent, is:

1. 4 years
2. 7 years
3. 10 years
4. 15 years

Article 13 of the Civil Transactions Law classes a non-discerning person as incompetent and deems a person under the age of seven non-discerning (text in force on 2027-03-21), so seven years is the threshold. A person who has reached seven but not the age of majority is a minor with discernment and is partially incompetent under Article 14, so ten and fifteen years place the threshold too late, while four years places it too early.

6. On 1 March 2027 Mr Faisal offers to sell machinery to Najd Logistics Company and promises to keep the offer open for a fixed period. He dies on 5 March 2027, before any reply. On 8 March 2027 the company accepts. Under the Civil Transactions Law, the position is that:

1. a contract is concluded, as the offer was open for a fixed period
2. the offer continues to bind his heirs until the period ends
3. the contract is concluded once the heirs learn of the acceptance
4. the offer expired on his death, and the acceptance is a new offer

Article 36 of the Civil Transactions Law provides that an offer expires if the offeror dies before the acceptance is made, even if the offer is for a specified period. An acceptance made after the offer has expired does not conclude the contract and is deemed a new offer. The fixed period matters for withdrawal under Article 35, so it does not keep the offer alive after death, does not bind the heirs, and the heirs' knowledge of the acceptance is irrelevant.

7. Under Article 37 of the Civil Transactions Law, the silence of an offeree is deemed acceptance when:

1. the offer is for the sole benefit of the offeree
2. the offeree is a merchant and the offer concerns goods
3. the offeree stays silent for one week after the offer
4. the offer is sent in writing by registered mail

Article 37 of the Civil Transactions Law states that silence is not acceptance unless an agreement or presumptive evidence indicates acceptance. It deems silence to be acceptance where the parties had a prior dealing to which the offer relates, or where the offer is for the sole benefit of the offeree. Merchant status, a waiting period of a week and the form in which the offer is sent are not criteria in the Law.

8. Al-Waha Furnishings sells a display unit to Ms Noura by instalments and delivers it at once. The contract provides that ownership passes to her when the price is paid in full. Before the last instalment is paid, ownership is:

1. with Ms Noura, since ownership passes when the sale is concluded
2. with Ms Noura, since ownership passes when the item is delivered
3. with the seller, because the transfer may await full payment
4. shared between them in proportion to the instalments paid

Article 318 of the Civil Transactions Law sets the general rule that ownership passes to the buyer when the sale is concluded, but Article 320 lets the seller, where payment is deferred or made in instalments, make the transfer conditional on receipt of the full price even if the item is delivered. Ms Noura becomes the owner on full payment, and she is then treated as owner from the date the sale was concluded. The general rule is displaced by the clause, delivery is not the moment of transfer, and the Law gives no sharing of ownership in proportion to instalments.

9. Under Article 407 of the Civil Transactions Law, lease is a contract under which a lessor enables a lessee to use and enjoy:

1. a non-consumable thing for a specified period in return for rent
2. a consumable thing for a specified period in return for rent
3. a non-consumable thing, with ownership passing for a price
4. a non-consumable thing without a fixed period or any rent

Article 407 of the Civil Transactions Law defines lease by its elements: a lessor, a lessee, a non-consumable thing, a specified period and rent. A consumable thing is used up by its use, so it cannot be the subject of a lease. Transfer of ownership for a price describes a sale under Article 307, and use without a fixed period or rent lacks two elements of the definition.

10. Under the Civil Transactions Law, a clause in a company contract that fixes one partner's share of the profits at a set amount is:

1. valid, because partners may agree on profit shares freely
2. deemed invalid, even if every partner has agreed to it
3. valid, if it stays below the partner's capital contribution
4. valid, but limited to the first financial year of the company

Article 535 of the Civil Transactions Law deems invalid a condition that fixes a partner's share of the profits as a set amount, or that excludes a partner from profits or exempts him from losses. Article 534 lets partners agree on shares other than in proportion to each partner's share, but that freedom does not reach a fixed amount. The Law sets no limit linked to the capital contribution or to the first financial year.

11. Under Article 579 of the Civil Transactions Law, a suretyship contract:

1. needs the debtor's acceptance to be concluded
2. may be concluded without the debtor's knowledge
3. is concluded between the surety and the debtor
4. is valid once registered with the Commercial Register

Article 579 of the Civil Transactions Law provides that a suretyship contract is concluded between the surety and the creditor, and that the debtor's acceptance is not a condition, so it may be concluded without his knowledge and despite his objection. The debtor is therefore not a party to it. Neither Article 578 nor Article 579 makes registration with the Commercial Register a condition of its validity.

12. Under the Law of Commercial Books, the minimum period for which a merchant and his heirs must keep the commercial books and the related correspondence and documents is:

1. 5 years
2. 7 years
3. 10 years
4. 15 years

Article 8 of the Commercial Books Law requires the merchant and his heirs to keep the books, and the correspondence and documents referred to in Article 6, for at least 10 years (text in force on 2027-03-21), so 10 years is the minimum period. Five and seven years fall short of that minimum, and fifteen years overstates it, since the Law sets the floor at 10 years.

13. Mr Faisal is a merchant whose capital is exactly SAR 100,000. Under Article 1 of the Law of Commercial Books, he:

1. must keep the original journal but not the ledger
2. must keep the inventory book, but not the journal or ledger
3. is not required to keep the three minimum books of account
4. must keep the three books, as his capital reaches the limit

Article 1 of the Commercial Books Law requires a merchant to keep at least the original journal, the inventory book and the general ledger, but exempts a merchant whose capital does not exceed SAR 100,000 (text in force on 2027-03-21). Capital of exactly SAR 100,000 does not exceed the limit, so he is exempt. Reaching the limit does not trigger the obligation, and the Law does not require a partial set such as the journal alone or the inventory book alone.

14. Under Article 10 of the Commercial Register Law, a merchant must update the data in the Commercial Register after any change or modification to it within:

1. 7 days
2. 15 days
3. 30 days
4. 60 days

Article 10 of the Commercial Register Law requires the merchant to update the data within 15 days from the date of the change or modification (text in force on 2027-03-21). Seven days is shorter than the period the Law allows, while 30 and 60 days exceed it. The update duty is separate from the yearly statement confirming the data under Article 11 of the Commercial Register Law.

15. One partner brings a claim relating to the company against another partner. Under Article 17 of the Law of Commercial Courts, territorial jurisdiction belongs to the commercial court covering:

1. the place where the defendant partner is domiciled
2. the place where the plaintiff partner is domiciled
3. the place where the company's headquarters is located
4. the place where the articles of incorporation were signed

Article 17 of the Commercial Courts Law provides that, in claims pertaining to companies, jurisdiction belongs to the court covering the company's headquarters, whether the claim is by one partner against another, against the company, or against a manager or board member. The defendant's domicile is the general rule for other claims where the Law is silent, and the plaintiff's domicile applies when the defendant has no domicile in the Kingdom. The place of signing the articles is not a criterion for company claims.

16. Which of the following is NOT a form of company under Article 4 of the Companies Law:

1. General partnership
2. Limited partnership
3. Joint-stock company
4. Sole proprietorship

Article 4 of the Companies Law lists the forms a company may take: general partnership, limited partnership, joint-stock company, simplified joint-stock company and limited liability company. A sole proprietorship is not one of them; Article 220 of the Companies Law treats the owners of sole proprietorships as persons who may transfer the assets to a company incorporated under the Law. The other three are forms listed in Article 4.

17. The incorporators of Najd Logistics Company signed contracts in its name during the incorporation period, but the company never completed the incorporation procedures required by the Companies Law. Towards third parties, who is liable for those contracts:

1. the persons who acted in its name, jointly and personally
2. the company itself, as a legal person from the signing date
3. the Ministry of Commerce, as the registering authority
4. the future partners, up to their agreed contributions

Article 9 of the Companies Law makes the persons who act or conclude transactions in the name of a company, or on its behalf, jointly and personally liable towards third parties when the company fails to satisfy the incorporation procedures. A company acquires legal personality on registration with the Commercial Register, and during incorporation it has personality only to the extent necessary for incorporation, provided it completes the process. The company is therefore not the debtor, the Ministry has no liability under the text, and liability limited to contributions describes a registered limited liability company under Article 156 of the Companies Law, not an unregistered one.

18. Najd Logistics Company is a limited liability company with capital of SAR 750,000. Its manager learns on 14 April 2027 that its losses have reached SAR 375,000. Under the Companies Law, the manager must call a general assembly of partners to consider continuing or dissolving the company within:

1. 30 days from the date he learns of the losses
2. 45 days from the end of the fiscal year
3. 60 days from the date he learns of the losses
4. 90 days from the end of the fiscal year

Article 182 of the Companies Law requires the manager of a limited liability company whose losses amount to half of its capital to call a general assembly of partners within 60 days from the date of his knowledge (text in force on 2027-03-21), to consider continuation with measures to resolve the losses, or dissolution. Losses of SAR 375,000 on capital of SAR 750,000 are exactly half, so the duty runs from 14 April 2027. The 30-day period understates the time the Law allows, and the 45-day and 90-day periods run from the fiscal year end, which is not the trigger.

19. Under Article 216 of the Companies Law, a holding company is a company that:

1. trades its own shares on the capital market for profit
2. owns stakes in companies that become its subsidiaries
3. manages the assets of another company in liquidation
4. results from the merger of two or more companies

Article 216 of the Companies Law defines a holding company as a joint-stock company, simplified joint-stock company or limited liability company that incorporates companies, or owns interests or shares in existing companies, that become its subsidiaries. Trading its own shares, managing assets in a liquidation and arising from a merger are not elements of that definition. Under Article 217 of the Companies Law, a company is a subsidiary where, for instance, the holding company owns the majority of the voting rights.

20. Under Article 220 of the Companies Law, the conversion of a company into a simplified joint-stock company requires:

1. approval of the partners owning more than half of the capital
2. approval of the partners owning two-thirds of the capital
3. a decision of the manager ratified by the Ministry
4. the unanimous approval of the partners or shareholders

Article 220 of the Companies Law requires the unanimous approval of the partners or shareholders for the conversion of a company into a simplified joint-stock company (text in force on 2027-03-21). The majority of more than half of the capital appears in Article 220 only for conversion into a joint-stock company in specified family-held cases, and the two-thirds majority has no basis there. A manager's decision ratified by the Ministry is not the mechanism: conversion follows the conditions for amending the articles, plus incorporation, registration and publication.

21. Under Article 244 of the Companies Law, once a company is terminated and enters liquidation, it:

1. retains legal personality to the extent necessary for liquidation
2. keeps legal personality for the period fixed in its articles
3. converts into a general partnership of its former partners
4. continues its business activities until debts are fully paid

Article 244 of the Companies Law provides that on termination the company enters liquidation and retains its legal personality to the extent necessary for the liquidation. Its personality does not depend on a period fixed in its articles, and it does not become a partnership. The liquidator may not start new business activities unless required to complete previous ones, under Article 252 of the Companies Law, so the business does not continue as before.

22. Under Article 263 of the Companies Law, the penalties of Articles 260 and 261 are doubled for a repeat offender, meaning a person who commits the same offense for which a final judgment or decision was issued within:

1. 1 year
2. 2 years
3. 3 years
4. 5 years

Article 263 of the Companies Law doubles the penalties of Articles 260 and 261 for a repeat offender, defined as a person who commits the same offense for which a final judgment or decision was issued within three years from the date of its issuance (text in force on 2027-03-21). One or two years would exclude repeat offenses inside the three-year window, while five years would extend the definition beyond what the Law provides.

23. Under the Companies Law, the minimum and maximum durations of a company's first fiscal year, counted from its registration with the Commercial Register, are:

1. 3 months and 12 months
2. 6 months and 18 months
3. 9 months and 15 months
4. 12 months and 24 months

Article 16 of the Companies Law sets the fiscal year at 12 months, to be specified in the articles, and as an exception lets the first fiscal year cover not less than six months and not more than 18 months from registration with the Commercial Register (text checked on 4 November 2026 for the 21 March 2027 session). A 3-month floor understates the minimum and its 12-month ceiling wrongly treats the normal year as a cap; a 9-to-15-month band is an invented range around the normal 12 months; a 12-to-24-month range wrongly makes 12 months the floor and exceeds the 18-month ceiling.

24. Under Article 22 of the Companies Law, a shareholder who lawfully received a dividend paid out of distributable dividends:

1. must return it when the company's creditors demand repayment
2. must return it unless he can show that he acted in good faith
3. keeps it unless the board later reclassifies it as an advance
4. keeps it, even if the company incurs losses in later periods

Article 22(3) of the Companies Law provides that a partner or shareholder who received a dividend lawfully under paragraph (1) is not obliged to return it, even if the company incurs losses in subsequent periods. The creditors' claim and the good-faith point belong to paragraph (2), which deals with dividends distributed in violation of paragraph (1): creditors may then demand repayment of their debts from the company, and the company may recover the dividends from each recipient, even a bona fide one. Nothing in Article 22 lets the board reclassify a lawful dividend as an advance and so trigger its repayment.

25. Al-Waha Furnishings Company is a joint-stock company that is neither a bank nor a financing company. Its board approves a SAR 200,000 loan to the son of one of its board members, outside any employee incentive programme. Under Article 72 of the Companies Law, the loan contract is:

1. valid, because the borrower is a relative, not a board member
2. valid, if the ordinary general assembly later ratifies it
3. null and void, with compensation claimable from the violator
4. voidable, on the company's petition to the competent court

Article 72(1) of the Companies Law bars a joint-stock company from lending to its board members or guaranteeing their loans and extends the ban to their relatives, whom Article 1 defines as ascendants, descendants and spouses, so a member's son is covered; a contract concluded in breach is null and void, and the company may petition the competent judicial authority for compensation from the violator. The exceptions in paragraph (2) cover banks and financing companies and loans under employee incentive programmes approved under the articles or by the general assembly, so neither the borrower's status as a relative nor a later ratification by the ordinary general assembly can validate the loan. A contract that the company must ask the court to invalidate is the Article 27(6) remedy for conflict-of-interest transactions, not the Article 72 sanction (text checked on 4 November 2026 for the 21 March 2027 session).

26. In a joint-stock company, the authorized capital mentioned in Article 60 of the Companies Law is best defined as:

1. a ceiling set in the articles for board-approved capital increases
2. the part of issued capital that shareholders have already paid up
3. the capital that the extraordinary assembly approves each year
4. the minimum capital that must be subscribed at incorporation

Article 60 of the Companies Law states that a joint-stock company has issued capital representing subscribed shares and that its articles may provide for authorized capital; the board may then increase issued capital by its own decision within that limit, provided the issued capital is paid in full. The paid-up portion is a different notion, an annual approval by the extraordinary assembly is not what Article 60 describes, and the incorporation minimum is the separate issued-capital floor of Article 59 (SAR 500,000, a quarter of it paid up) (text checked on 4 November 2026 for the 21 March 2027 session).

27. Under Article 93 of the Companies Law, a decision of an extraordinary general assembly to merge the company with another company is valid only if passed by:

1. a majority of the voting rights represented at the meeting
2. three quarters of the voting shares represented at the meeting
3. two thirds of the voting shares represented at the meeting
4. three quarters of the company's voting shares in issue

Article 93(4) of the Companies Law sets the general threshold of the extraordinary assembly at two thirds of the voting shares represented, but decisions on a capital increase or decrease, an extension of the term, dissolution before the term expires, a merger or a division need three quarters of the voting shares represented (text checked on 4 November 2026 for the 21 March 2027 session). Two thirds is therefore the general rule, not the merger rule; a simple majority is the ordinary assembly rule of Article 92(3); and the three-quarter test is applied to the shares represented at the meeting, not to all shares in issue.

28. Najd Logistics Company, an unlisted joint-stock company, holds an ordinary general assembly attended by holders of 20% of the voting shares. Its articles set no higher quorum and permit a second meeting, which the invitation to the first meeting announced. Under Article 92 of the Companies Law:

1. the first meeting is valid because 20% exceeds the legal minimum
2. the first meeting is invalid; the second needs a quarter of the voting shares
3. the first meeting is invalid; the second needs half of the voting shares
4. the first meeting is invalid; the second is valid with any attendance

Article 92(1) of the Companies Law requires attendance by holders of at least a quarter of the voting shares for a valid ordinary assembly, unless the articles set a higher percentage not exceeding half, so 20% falls short and the first meeting is invalid. Under Article 92(2) a second meeting is called within 30 days following the date set for the first one, or held one hour after the end of the period set for the first meeting where the articles permit it and the first invitation announced it, and in all cases it is valid regardless of the number of voting shares represented (text checked on 4 November 2026 for the 21 March 2027 session). A quarter is the first-meeting quorum of Article 92(1) and the second-meeting quorum of an extraordinary assembly under Article 93(2), and half is the extraordinary assembly's first-meeting quorum of Article 93(1); neither applies to this second meeting.

29. When the losses of a joint-stock company amount to half of its issued capital, Article 132 of the Companies Law requires the board of directors to:

1. announce within 60 days and call an extraordinary assembly within 180 days
2. announce within 180 days and call an extraordinary assembly within 60 days
3. announce within 30 days and call an ordinary assembly within 90 days
4. wait for the auditor's report, then call an ordinary assembly within 180 days

Article 132 of the Companies Law requires the board, within 60 days from the date it learns of losses equal to half of the issued capital, to announce the losses and its recommendations, and within 180 days from that date to call an extraordinary general assembly to decide whether the company continues, after taking the measures needed to resolve the losses, or is dissolved (text checked on 4 November 2026 for the 21 March 2027 session). Reversing the two periods, shortening them to 30 and 90 days, or relying on an ordinary assembly after the auditor's report does not match the text.

30. A board member of a joint-stock company has a direct or indirect interest in each transaction below. Under Article 27 of the Companies Law, authorization is required for each of them EXCEPT:

1. a lease of the member's building to the company at a negotiated rent
2. a consultancy contract between the company and the member's firm
3. a purchase of equipment from a company controlled by the member
4. a supply contract awarded to the member's firm through a public tender

Article 27(1) of the Companies Law bars a board member from any direct or indirect interest in transactions concluded for the company's account without the authorization of the general assembly or its designees. Article 27(5)(a) excludes transactions and contracts concluded pursuant to public tenders, alongside personal-needs contracts on the company's standard terms and cases set by the Regulations. A negotiated lease, a consultancy contract and a purchase from a controlled company are ordinary related-party deals that need authorization; without it the company may ask the court to invalidate the contract and recover the profit under Article 27(6).

31. Ms Noura holds 3% of the shares of a joint-stock company whose articles set no special percentage for derivative actions. The board's negligence has harmed the company, which has not sued, but has caused her no personal damage. Under Article 29 of the Companies Law:

1. she may sue on the company's behalf after notifying the board 14 days earlier
2. she may sue on the company's behalf without any notice to the board
3. she cannot sue alone on the company's behalf, because her holding is below 5%
4. she may bring a private action for the damage suffered by the company

Article 29(2) of the Companies Law lets one or more shareholders representing 5% of the capital, unless the articles stipulate a lower percentage, bring a derivative action on the company's behalf when the company has not sued; at 3%, with no lower percentage in the articles, Ms Noura cannot bring it alone and would need other shareholders to reach 5% (text checked on 4 November 2026 for the 21 March 2027 session). The 14-day notice of Article 29(3) is a further condition for those who do qualify, so it cannot rescue her claim, and it cannot be skipped. A private action under Article 29(4) exists for damage that personally affects the shareholder, which is not the case here.

32. The preemptive right created by Article 128 of the Companies Law entitles a shareholder:

1. to subscribe in priority to new shares issued against cash contributions
2. to receive new shares free of charge when reserves are capitalized
3. to buy shares offered by other shareholders before outside buyers
4. to veto a capital increase approved by the extraordinary assembly

Article 128 of the Companies Law gives the shareholder who owns the share on the date of the extraordinary general assembly's decision, or of the board's decision within the authorized capital, a preemptive right to subscribe to new shares issued against cash contributions, and requires that he be notified of it by registered mail or by any means of technology. Bonus shares issued when reserves are capitalized are not issued against cash; a priority to buy shares that other shareholders sell is a transfer restriction, a different mechanism from Article 128; and the right gives no power to veto a capital increase.

33. Mr Faisal learns, in a family conversation with a relative who sits on the board of Najd Logistics Company, a listed company, that the company is about to announce a major acquisition. The information has not been disclosed and would materially move the share price. Before the announcement, Mr Faisal buys shares in the company. Under the Capital Market Law, his purchase is:

1. prohibited, because he obtained inside information through a family relationship
2. prohibited, because he is not registered as a shareholder of the company
3. permitted, because insiders are limited to directors and employees
4. permitted, because he bought the shares before the public announcement

Article 50(a) of the Capital Market Law prohibits a person who obtains inside information through a family, business or contractual relationship from trading in the related Security when the information is undisclosed and would materially affect its price. Mr Faisal is therefore an insider although he holds no position in the company. The prohibition has no shareholder-registration condition, the insider notion is not limited to directors and employees, and buying before the announcement is exactly the conduct caught.

34. Al-Waha Furnishings holds a dominant position in the market for office chairs. To force a new competitor out of the market, it sells its chairs below their total cost. Under the Competition Law, this conduct is:

1. prohibited, as a restrictive agreement between competing entities
2. permitted, because lower prices benefit consumers in the market
3. permitted, provided the company notifies the competition authority first
4. prohibited, as an abuse of a dominant position to limit competition

Article 6 of the Competition Law prohibits an entity with a dominant position from exploiting it, including by selling below total cost to force entities out of the market. Article 5 of the Competition Law targets agreements or practices between entities, so a unilateral price cut is not a restrictive agreement. Consumer benefit is no defence, and the notification duty in Article 7 concerns economic concentrations, not pricing.

35. Under the Competition Law, entities seeking to join an economic concentration transaction must notify the competition authority when their total annual sales exceed the amount set by the Regulations. What is the minimum notice period before the transaction is completed?

1. 30 days
2. 60 days
3. 90 days
4. 120 days

Article 7 of the Competition Law requires entities joining an economic concentration to notify the authority at least 90 days before completion, where annual sales exceed the amount determined by the Regulations (text in force at 21 March 2027). The sales threshold itself sits in the Regulations. The periods of 30 and 60 days are shorter than the statutory minimum, and 120 days is longer than the minimum the text requires.