Settling Accounts Between Partners in a Dispute: How the Accounting Expert Determines Profits, Withdrawals and Each Partner’s Share

Most partner disputes in small and medium businesses are not really about the law; they are about numbers that were never properly recorded: withdrawals with no document, personal expenses paid from the company account, an in-kind contribution never booked, one partner running the business alone with no distribution decision for years. When the dispute reaches the commercial court, an accounting expert is appointed for what is, in essence, a single task: the settlement of accounts between the partners — rebuilding each partner’s account from the capital contribution to the last riyal.

This guide explains how the expert does that in practice, what the law gives them to work with, and what a partner — claimant or defendant — should know before the expert work begins.

1. The legal framework the expert works within

• Right of inspection: a non-managing partner in a limited liability company — or someone they authorise — may ask to inspect the company’s business at its head office and examine its records and documents twice during the financial year; the company must comply within fifteen days, and any contrary clause is void (Companies Law, Article 171).
• Profits: shares carry equal rights to net profits and to the liquidation surplus unless the articles provide otherwise, and a partner’s entitlement arises under the decision of the general assembly or the partners (Article 175). Profits may be distributed only out of distributable profits, and anything distributed in breach must be returned even by a good-faith partner (Article 22).
• Manager’s liability: the manager is liable to compensate the company or the partners for damage caused by breaching the law or the articles, or by errors, negligence or default (Article 28), and a partner may bring the liability action (Article 29).
• Books as evidence: a merchant’s mandatory, regular books are evidence for their owner against a merchant opponent, and are evidence against their owner — regular or not — in whatever the opponent relies on; if a party refuses to produce its books, the court may direct the supplementary oath to the party relying on them (Evidence Law, Article 31).
• Compelling production: in commercial cases a party may ask its opponent to produce or allow inspection of a relevant document, and if the opponent refuses the court may treat the refusal as a presumption (Article 36); the court may also obtain documents from a public body (Article 37).
• Expertise: the court appoints the expert and defines the task and powers precisely (Articles 110 and 111); the expert may request books, records and documents from the parties and others and inspect premises (Article 115), and no one may refuse to enable the expert’s work without lawful justification (Article 116).

2. What the expert asks for on day one

• The articles of association and amendments, the commercial registration, and any side agreements between the partners (manager’s remuneration, loans, guarantees).
• Statements of all the company’s bank accounts for the whole dispute period, not only the main account.
• The books: the annual trial balance, the ledger of partners’ current accounts, and the entries for transfers to and from them.
• The annual financial statements, the auditor’s reports if any, and the zakat and VAT returns — an external “anchor” for the figures declared to ZATCA.
• Contracts and major invoices, e-invoicing data, payroll sheets and the GOSI register.
• Minutes of partners’ meetings and distribution decisions, if any — and their absence is itself information.

3. The settlement methodology, step by step

1. Fix the starting point: the capital actually paid by each partner (not only the amount written in the articles), when it was paid, and any in-kind contributions and their value when contributed.
2. Rebuild the cash: match every bank movement to the books, classify the unmatched movements, and identify undeposited cash sales if any.
3. Isolate partner-related flows: direct transfers, personal expenses paid by the company, loans to and from partners, amounts a partner paid on the company’s behalf, and the managing partner’s remuneration.
4. Recompute the profit for each year on a consistent basis, excluding what is not a company expense and adding what was never recorded, then compare with the zakat returns and financial statements and explain the differences.
5. Allocate the profit under the articles (by shareholding unless agreed otherwise), distinguishing distributable profits from unrealised gains on assets.
6. Settle each partner’s account: capital + share of profits − withdrawals and personal expenses − share of losses ± loans = the balance due to or from the partner.
7. Present the result in a single table with a reconciliation between the expert’s result and the book balances, stating every assumption the expert had to make where documents were missing.

Item	Partner A	Partner B
Paid-in capital	×	×
+ Share of recomputed profits	×	×
− Documented withdrawals	×	×
− Personal expenses paid by the company	×	×
± Loans from / to the company	×	×
− Share of losses	×	×
= Balance due	×	×

4. Recurring points of dispute and how the expert treats them

• The managing partner’s remuneration: counted only where a decision or agreement establishes it; if none exists, it is presented as an alternative scenario and left to the court.
• Personal expenses: removed from company expenses and charged to the partner’s account, on the basis of documents, not suspicion.
• Unrecorded in-kind contributions (a vehicle, equipment, premises used rent-free): valued at the time of contribution and merged into capital only where the articles establish it.
• Loan or capital? Money injected by a partner without amending the capital is a loan from the partner to the company unless the contrary is proven — and this changes the final balance considerably.
• Guarantees and liabilities a partner settled personally on the company’s behalf: recorded as a debt owed to the partner on the payment document.
• Zakat: who paid it and in whose name, and whether it is a company expense or charged to the partners according to the nature of the entity.

5. When the books are incomplete or withheld

Missing books do not stop the expert work, but they change its tools. The expert rebuilds the figures from external sources: bank statements, the returns filed with ZATCA, e-invoicing data, customer and supplier confirmations, and the GOSI register for payroll. The report states the level of confidence in each figure, because the Evidence Law allows the court to treat a party’s refusal to produce documents as a presumption against it (Article 36) and to treat the books as evidence against their owner in whatever the opponent relies on (Article 31).

6. After the report

The report must contain the task, the work performed in detail, the parties’ statements and documents and their technical analysis, and the result and technical opinion with the grounds set out precisely (Evidence Law, Article 117). The court may summon the expert for questioning, order the gaps to be completed, or appoint another expert (Article 120). The expert’s opinion does not bind the court, but if the court does not adopt it in whole or in part it must state its reasons in the judgment (Article 121). We set out the common grounds of challenge in the accounting expert report before the commercial court.

7. What a partner should do before it becomes a dispute

• Exercise the right of inspection twice a year and document the request and the response.
• Insist on annual financial statements and a written distribution decision every year, even if the decision is “no distribution”.
• Give every withdrawal a document and an entry in the partner’s current account in the month it happens.
• Agree in writing on the managing partner’s remuneration and on how money injected by partners is treated (loan or capital increase).
• Keep personal bank accounts completely separate from the company’s accounts.

Our litigation support reports service covers this work whether we act as the court-appointed expert or as a consulting expert for one party, with the same methodology in both cases.

Frequently asked questions

Sources

• Companies Law — Articles 22, 28, 29, 171, 175 and 178 (Bureau of Experts)
• Evidence Law — Royal Decree M/43 of 26/5/1443 AH: Articles 31, 34–37 and 110–123 (Bureau of Experts)

Read next: Embezzlement and Financial Fraud Reports: How They Are Investigated and Proven.