Saudi Arabia: Down With The Details

Last Updated: 12 November 2018
Article by Dario Najm

THE IMPLEMENTING REGULATIONS

Nearly six months after Saudi Arabia approved its first Bankruptcy Law (Saudi Arabia Royal Decree No. M5/1439 and Saudi Arabia Cabinet Decision No. 264/1439), the Kingdom's Council of Ministers has adopted the new law's Implementing Regulations in Saudi Arabia Cabinet Decision No. 622/1439 which was published in the Official Gazette, Issue 4744 on 4 September 2018," Dario Najm states.

"These Regulations organise the different types of proceedings under the Bankruptcy Law before the relevant courts. Short notification periods have been given for all procedures mentioned in the Bankruptcy Law and technology is also to be used in all the relevant procedures, including notification by electronic means, e.g. SMS messages will be sent through authenticated mobile numbers, emails or accounts registered in any of the Government's electronic systems. In addition, in another move to modernise, all meetings involving bankruptcy (likely to be mainly creditors' meetings) can be held with the aid of technology when and if one of the relevant parties cannot be physically present for any of the meetings," Najm adds.

BANKRUPTCY TRUSTEES AND EXPE

"Under Article 9 of Saudi Arabia Cabinet Decision No. 264/1439, a Bankruptcy Committee will license the trustees and experts in line with the Regulations," Najm adds.

"The Implementing Regulations now clarify that one year from the Saudi Bankruptcy law coming into force, people who can be considered licensed and enrolled in the list of bankruptcy trustees with the bankruptcy committee will need to meet a number of conditions. These include being a Saudi national who is of good conduct and has not been convicted of a crime involving moral turpitude or dishonesty or convicted by any court or disciplinary committee."

"Such individuals must also be a member of the Saudi Organisation for Certified Public Accountants (or SOCPA), or a licensed lawyer who has an academic or professional qualification in accounting and is accredited by SOCPA. They must also have practical experience of at least three years after obtaining the basic membership or the license for practising legal profession," Najm adds.

"It is also important to note that the Implementing Regulations state that after the first year has elapsed, anyone who wishes to be registered on the trustees or experts' list must fulfil the conditions stipulated in the licensing rules."

"Articles 22 and 23 of the Implementing Regulations also detail the terms and conditions for the resignation and dismissal of trustees and experts and some general provisions relating to trustees," Najm states.

BANKRUPTCY PROCEEDING

"The Implementing Regulations detail some common provisions for all bankruptcy proceedings," Najm states. "These include the submission of a petition to open bankruptcy proceedings before the court and provisional measures based on court orders. There are also notification and announcement procedures, and specific rules on documentation and access to information and confidentiality."

"The regulations cover the sale of a bankrupt's assets and provide a list of creditors' requests prepared by the trustee or the bankruptcy committee. These include information relating to the creditors, the existence of securities over assets and debts which are susceptible to setoff," Najm continues

"Proposals for a preventive composition can be voted on as can preventive compositions for small debtors, financial reorganisations or financial reorganisations for small debtors. There are details of the information relating to the debtors and their activity, assets, guarantees and claims and lawsuits filed against debtors."

"In addition the regulations provide more detail on termination of proceedings, and the formation and termination of creditors' committees, as well as their tasks and meetings," Najm notes. "Article 27 of the Implementing Regulations includes details on meetings of the creditors' committee and states their deliberations and voting can be concluded using modern technology. There are also details on the amendment of a plan at the request of debtors or trustees and after the court has accepted it," Najm adds.

PREVENTATIVE SETTLEMENT PROCEEDING

"Preventative settlements are procedures which allow a debtor to reach an agreement with their creditors in order to settle their debts while maintaining their management of the company," Najm states. "A debtor must ensure the performance of their contractual obligations once the preventive settlement proceeding is activated. During this period, they must deposit in the bankruptcy register, the court's decision approving the petition for suspension or extension of claims on its issuance. If a debtor wishes to protect their activities and/or the interest of the majority of the creditors, they may terminate a contract to which they are a party by submitting a petition for termination to the court under Article 37 of the Implementing Regulations."

"They may also apply to the court to amend the proposal. However all of these options require the prior approval of the court and that the creditors vote in their favour," Najm adds.

"One interesting point is that the provisions on preventative settlement for debtors and small debtors found in the regulations are similar."

FINANCIAL REORGANISATION PROCEEDING

"When it comes to proceedings on financial reorganisation, again these are similar for debtors and small debtors," Najm states. "Under Article 2 of Saudi Arabia Cabinet Decision No. 264/1439 financial reorganisation proceedings are a procedure which allows a debtor to reach an agreement with their creditors through reorganising their financial arrangements under the supervision of a bankruptcy licensed trustee," Najm explains. "A financial reorganisation application will be acceptable if, and only if, the petition for opening the financial reorganisation is recorded before the expiry of the period specified in Articles 150 and 181 of the Companies' Law, Saudi Arabia Royal Decree No. M3/1437 and Saudi Arabia Cabinet Decision No. 30/1437."

"More detail on this area is given in the Implementing Regulations, as Article 45 and 65 state the trustee should attach their report on their opinion on the creditor's possible approval of the proposal and its feasibility. Once the creditors have voted, the trustee then submits the result to the court and request its ratification or the termination of the financial reorganisation."

"It is important to note that during a financial reorganisation, the debtor has to prepare a report every three months on the progress of the implementation of the plan and submit this to the trustee. This must include a statement on the implementation of the plan's clauses during the reported period, a statement of difficulties faced by the debtor in implementing the plan and steps taken or proposed to overcome those difficulties. Financial statements and/or the financial position and any other information or data determined by the bankruptcy committee is also needed," Najm adds.

LIQUIDATION

"Liquidation is the act of selling the debtors' assets and distributing the proceeds to the creditors, through and under the supervision of the bankruptcy-licensed trustee. Under Article 93(2)(c) of the Companies' Law, Saudi Arabia Royal Decree No. M3/1437 and Saudi Arabia Cabinet Decision No. 30/1437, in order for there to be a petition to open a liquidation process and register it with the court, the claimed debt must be payable under a writ of execution or under an ordinary document and the creditor must prove they have requested the debtor pay their claim 28 days before the date of the petition's registration, that no payment has been made and no dispute has been filed," Najm explains.

"The Implementing Regulations also now specify how the announcement of the bankruptcy assets must be executed, how the termination of employment agreements works and distribution to creditors based on the amounts allocated to each of them," Najm states.

ADMINISTRATIVE LIQUIDATION

"Under Articles 1 and 167 of the Bankruptcy Law, administrative liquidation is the process of selling the liquidation assets which are not expected to cover the expenses of the liquidation (including the Small Debtors' Liquidation Process)," Najm states.

"Article 70 of the Implementing Regulations clarifies this area too as it states the proceeds of the sale of bankruptcy assets will not be effective if the estimated cost of selling the asset is equal to or greater than the estimated value of its sale or if the asset cannot be sold within a reasonable period."

"However, if the proceeds from the sale of bankruptcy assets are sufficient to meet the expenses of the liquidation process, the proceeds are distributed in a specific way," Najm explains.

"Firstly, they will cover fees and expenses of the bankruptcy committee. Then there will be distributions to creditors in line with the provisions of distribution stipulated in the Bankruptcy Law and the Implementing Regulations."

WHAT'S NEXT?

"The Implementing Regulations came into force on 14 September 2018 which means the Saudi Bankruptcy Law itself is now in force and options for corporate restructuring in Saudi Arabia have become clearer to those interested in using them," Najm states.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions