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Case Study
Dispute Value
Legal Representation in a Mudarabah and Share Investment Relationship Involving Capital Exceeding SAR 10 Million in Riyadh
SAR 10 million
Mudarabah and share investment relationships require careful legal analysis where parties have different roles, including providing capital, managing investments, and executing share transactions. This is particularly important where internal arrangements differ from external dealings.In this matter, Atyar Advocates and Legal Consultants advised a private client in Riyadh regarding a share trading and investment relationship involving capital exceeding SAR 10 million. The firm reviewed the investment agreement, analyzed the parties’ rights, obligations, financial contributions, and management roles, and addressed disputes arising from the relationship.The scope of work included legal advice, legal research, preparation of the legal study, pleadings and memoranda, litigation support, and preparation of the settlement and exit agreement, while maintaining strict confidentiality throughout the matter.
Quick Matter Overview
Investment Capital
More than SAR 10,000,000
Investment Location
Riyadh, Saudi Arabia
Nature of the Relationship
Mudarabah, investment, and partnership arrangement
Subject of the Investment
Share trading and investment
Subject of the Legal Work
Investment agreement, parties’ rights and obligations, and exit arrangements
Scope of Legal Services
Legal advice, legal study, litigation, drafting, legal research, and settlement and exit agreement
Background of the Investment Relationship
The matter concerned an investment relationship involving several parties who agreed to deploy capital exceeding SAR 10 million in share trading and investment activities in Riyadh. One or more parties contributed capital, while another was responsible for managing the investment and executing share transactions.As the relationship developed, disputes arose regarding capital contributions, investment management authority, trading results, profit and loss allocation, accounting rights, and compliance with the agreed terms.The client engaged Atyar Advocates and Legal Consultants to assess the legal position, review the investment agreement and financial documents, prepare the legal study and pleadings, handle the contentious matters, and ultimately prepare a settlement and exit agreement governing the termination of the relationship and settlement of the parties’ outstanding rights and obligations.
Investment Capital
Location of the Investment Relationship
Riyadh
Subject of the Investment
Share trading and investment
Nature of the Relationship
Investment, mudarabah, and partnership
Nature of the Mudarabah and Investment Relationship
The legal work focused on identifying the true nature of the relationship between the parties and determining the rights and obligations arising from the provision of capital and the management of the share investment.
The principal legal matters included:
- Reviewing the investment agreement.
- Identifying each party’s capital contribution.
- Assessing the authority granted to the investment manager.
- Reviewing the mechanism for executing share transactions.
- Analysing the results of the investment activity.
- Reviewing the allocation of profits and losses.
- Assessing accounting and financial rights.
- Reviewing the available financial records and supporting documents.
- Identifying the disputed matters between the parties.
- Assessing the client’s legal position.
- Reviewing the terms required for settlement and exit.
- Drafting a settlement and exit agreement between the parties.
Essential Elements of the Investment Relationship
Investment Capital
Identifying each party’s contribution and the financial rights arising from that contribution within the investment relationship.
Management of the Investment
Reviewing the authority granted to the party responsible for managing the funds and executing share transactions.
Profits and Losses
Assessing the agreed basis for allocating the financial results of the investment between the parties.
Accounts and Financial Records
Reviewing the available account statements, financial records, and documentation concerning movement of funds and investment results.
Rights and Obligations
Determining the parties’ respective contractual and legal positions arising from the investment agreement and the actual relationship.
Settlement and Exit
Structuring termination of the investment relationship and settlement of the parties’ outstanding rights, claims, and obligations.
Key Legal Challenges
Determining the True Legal Nature of the Relationship
It was necessary to determine the substance of the parties’ relationship rather than relying solely on the labels used in their dealings. This was important in identifying the rights and obligations applicable to each party within the investment arrangement.
Establishing the Financial Contributions
The matter required review of the capital contributed by each party and connection of those contributions with the available records and supporting documents. This was necessary to assess the parties’ financial entitlements before any settlement or exit could be structured.
Assessing the Investment Manager’s Authority
It was important to determine the scope of authority granted to the party responsible for managing the investment and executing the share transactions. This helped assess whether the investment activity remained within the agreed mandate.
Reviewing Profits and Losses
The relationship required analysis of trading results and the basis on which profits or losses were calculated and allocated between the parties. This issue was directly relevant to the parties’ competing financial positions.
Developing a Consistent Legal Position
The matter involved legal study, litigation, legal research, and drafting of pleadings and memoranda. It was therefore necessary to connect the financial facts, supporting documents, agreement, and legal claims within a single coherent position.
Structuring an Orderly Exit
Termination of the relationship required identification and settlement of the parties’ remaining rights and obligations. A clear settlement and exit agreement was therefore required to regulate the final resolution of the investment relationship.
Our Legal Strategy
Analysing the Agreement and Actual Relationship
The engagement began with review of the investment agreement and the actual roles performed by the parties in funding and managing the investment. This assisted in identifying the appropriate legal framework for the disputed matters.
Reviewing Contributions and Accounts
The available financial documents, account records, and information relating to capital and investment results were reviewed. The objective was to clarify the parties’ respective financial positions.
Assessing Management Authority
The scope of authority granted to the investment manager was analysed and compared with the investment activity actually undertaken. This helped assess responsibility connected with management of the investment.
Preparing the Legal Study and Research
A comprehensive legal study was prepared and the necessary legal research conducted to support the client’s position. The review addressed the agreement, financial contributions, rights, risks, and disputed matters.
Drafting Pleadings and Legal Memoranda
Pleadings and legal memoranda were prepared connecting the investment and financial facts with the supporting documents, legal arguments, and claims.
Structuring the Settlement and Exit
A settlement and exit agreement was drafted to regulate termination of the relationship and settlement of the parties’ outstanding rights, obligations, and claims.
Legal Services Provided
Legal Advice
Providing advice concerning the investment agreement, mudarabah relationship, and the parties’ respective rights and obligations.
Comprehensive Legal Study
Preparing a legal assessment of the financial contributions, investment management, accounts, and the client’s legal position.
Litigation
Handling contentious matters arising from the investment relationship and protecting the client’s legal position.
Drafting Pleadings and Legal Memoranda
Preparing pleadings, legal arguments, responses, and memoranda relating to the claims between the parties.
Legal Research
Conducting the legal research required to support the legal study, claims, and defences.
Drafting the Settlement and Exit Agreement
Preparing an agreement regulating termination of the investment relationship and settlement of the parties’ outstanding rights and obligations.
Legal Insight
Mudarabah relationships become more complex where some parties provide capital while another party manages the investment and executes trading activity.
For that reason, the scope of management authority should be clearly defined, while contributions, accounts, and the method of allocating profits and losses should be properly documented.
When the parties decide to exit the relationship, termination alone is not sufficient. The remaining amounts, rights, liabilities, and claims should be identified and settled within a clear written agreement designed to reduce the risk of future disputes.
Legal Value Delivered to the Client
- Analysed the nature of the mudarabah and investment relationship.
- Reviewed the parties’ financial contributions and accounts.
- Assessed the authority exercised in managing the investment.
- Identified the parties’ respective rights and obligations.
- Prepared pleadings, memoranda, and supporting legal research.
- Drafted a settlement and exit agreement to regulate termination of the relationship.
The Firm’s Experience in Mudarabah and Investment Relationships
Atyar Advocates and Legal Consultants provides legal services in investment, mudarabah, and partnership relationships, including review of agreements, analysis of financial contributions, assessment of management authority, and evaluation of the rights and obligations arising from investment activity.
The firm’s services also include legal studies and research, drafting pleadings and legal memoranda, and handling disputes concerning management, accounts, and investment results.
The firm also drafts settlement and exit agreements intended to regulate termination of investment relationships and settlement of outstanding financial and contractual rights.
Legal Team Responsible for This Matter
Prof. Dr. Turki Al-Tayyar
Founder and Managing Partner, and an expert in the judiciary, legal practice, arbitration, and university education, with more than 25 years of combined experience.
Mr. Salem Saad Al-Dosari
Partner specialising in administrative contracts, investment, and litigation, with extensive experience in administrative and commercial cases.
Practice Areas Related to This Matter
- Real Estate Dispute Resolution
- Property Ownership Claims
- Litigation Before the General Courts
- Investment Disputes
- Government Contracts and Administrative Matters
- Compensation Claims
Need Legal Support for a Mudarabah or Investment Relationship?
If you are a party to a mudarabah or share investment arrangement and require an assessment of your rights, review of financial records, assistance with a dispute, or structuring of an exit, Atyar Advocates and Legal Consultants provides legal advice, comprehensive legal studies, legal research, drafting, and litigation services throughout Saudi Arabia.
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بيانات الاتصال
- شارع التخصصي، النخيل، الرياض 12384
- 3132 شارع الأمير تركي، الكورنيش، 6309, الخبر
- Info@al-tayyar.com.sa
- 00966555398969
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