Saudi Arabia Approves New Bankruptcy Law
In line with Vision 2030, Saudi Arabia’s cabinet has approved a new law which will provide a framework for corporate bankruptcy. The new bankruptcy law aims to entice local and foreign investors to further contribute to the diversification of the Kingdom’s economy while reducing the risk of liquidation and bankruptcy.
Details of the law have yet to be released, but a 17-chapter draft of the legislation which had initially been approved by the Kingdom’s Shoura Council last December provided regulations pertaining to bankruptcy procedures for local and foreign companies.
An independent bankruptcy committee will be created to oversee all bankruptcy matters and will report directly to the Ministry of Commerce & Investment. The committee will be charged with governing preventative settlements, financial reorganization, and liquidation procedures while preserving the rights and considerations of both debtors and creditors. Debtors will be provided with opportunities to settle financial difficulties in order to continue operating in the Kingdom. Creditors will benefit due to streamlined processes and an increase in the number of small and medium enterprise investors.
The newly established law will succeed Royal Decrees 16 and 32 which had been issued to settle bankruptcy cases and will further null all laws or regulations inconsistent with the latest provisions. The law will officially go into effect 180 days following its release in the Um Al-Quraa publication.