60 40 Partnership Agreement Template for Saudi Arabia

A 60 40 Partnership Agreement is a comprehensive legal document that establishes the framework for a business partnership in Saudi Arabia where profits and responsibilities are divided on a 60-40 basis. Under Saudi Companies Law (2015) and Sharia commercial principles, this agreement provides legal certainty for partners entering into unequal profit-sharing arrangements while ensuring compliance with local regulations and Islamic business ethics.

When do you need this document?

You need a 60 40 Partnership Agreement when establishing a business partnership where one partner contributes significantly more capital, expertise, or resources than the other. This document is essential when foreign investors partner with Saudi nationals, as it helps navigate Foreign Investment Law requirements and ensures proper profit distribution. You'll also require this agreement when restructuring an existing business relationship to reflect changed circumstances, such as one partner taking on greater operational responsibilities or making additional capital investments. Joint venture projects between companies of different sizes often use this structure to fairly allocate returns based on each party's contribution level.

Key legal considerations

The agreement must clearly define each partner's capital contributions, both initial and ongoing, as Saudi law requires precise documentation of financial commitments. Management rights and decision-making authority need careful structuring, as the 60% partner typically assumes greater control while respecting the minority partner's rights. Profit distribution mechanisms must comply with Sharia principles, avoiding any arrangements that could be considered riba (prohibited interest). The document should address partner withdrawal procedures, dispute resolution methods, and succession planning. Liability allocation between partners requires clear definition to protect both parties' interests, particularly regarding third-party claims and business debts.

Legal requirements in Saudi Arabia

Under Saudi Companies Law (2015), the partnership must be registered with the Ministry of Commerce and Investment, requiring submission of the partnership agreement along with other formation documents. The agreement must specify the partnership's business activities within approved sectors under Saudi regulations. If foreign partners are involved, compliance with Foreign Investment Law is mandatory, including obtaining necessary approvals for restricted business activities. Sharia compliance requires that business activities avoid prohibited sectors such as alcohol, gambling, or interest-based financial services. The document must be executed before a notary public and may require Arabic translation for official registration. Bank account opening procedures will require presentation of the registered partnership agreement to establish business banking relationships.