{"id":145148,"date":"2026-07-10T09:48:29","date_gmt":"2026-07-10T09:48:29","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=145148"},"modified":"2026-07-10T09:49:23","modified_gmt":"2026-07-10T09:49:23","slug":"saudi-arabia-restructuring-insolvency","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/saudi-arabia-restructuring-insolvency\/","title":{"rendered":"Saudi Arabia: Restructuring &amp; Insolvency"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-145148","comparative_guide","type-comparative_guide","status-publish","hentry","guides-restructuring-insolvency","jurisdictions-saudi-arabia"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">MAJED ALRASHEED LAW FIRM<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/07\/MRF_Logo.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">MAJED ALRASHEED LAW FIRM<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/07\/MRF_Logo.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Restructuring &amp; Insolvency laws and regulations applicable in Saudi Arabia<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What forms of security can be granted over immovable and movable property? What formalities are required and what is the impact if such formalities are not complied with?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Saudi Civil Transactions Law (\u2018<strong>CTL<\/strong>\u2019) addresses accessory rights <em>in rem<\/em>, including mortgages, pledges, privileged rights (statutory liens), and what qualifies as such pursuant to special statutory provisions. Although the CTL contains general provisions on these rights, it largely defers to the relevant special statutes governing each form of security.<\/p>\n<p>In broad terms, security over immovable property must be created and registered in accordance with the applicable real estate registration and mortgage rules. Security over movable assets is generally perfected by registration, possession, control, or another statutory perfection mechanism, depending on the nature of the asset. Failure to comply with the applicable formalities may affect the validity, enforceability, priority, or third-party effectiveness of the security interest.<\/p>\n<p>Numerous Saudi laws, in addition to the CTL, contain special provisions governing certain forms of <em>in rem <\/em>securities. Examples include regimes relating to real estate, movable assets, vessels, aircraft, trademarks, commercial papers, warehouse receipts, mining rights, shares in companies, and electricity-sector assets. Privileged rights (statutory liens) are also addressed across scattered legislation, such as Labour Law, Personal Status Law, Social Insurance Law, Commercial Maritime Law, Civil Aviation Law, and State Revenues Law. Some of these privileged rights are general and extend to all of the debtor\u2019s assets, while others attach only to specific assets, such as maritime liens on a vessel, the ship lessor\u2019s privileged right over the lessee\u2019s cargo on board, and the carrier&#8217;s privileged right over transported cargo.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What practical issues do secured creditors face in enforcing their security package (e.g. timing issues, requirement for court involvement) in out-of-court and\/or insolvency proceedings?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In practice, the main issues faced by secured creditors are the need to enforce through the competent enforcement authority, the time required to complete enforcement, and the effect of any bankruptcy moratorium.<\/p>\n<p>With respect to the practical enforcement of mortgages over real property, where the mortgage has been duly registered, it constitutes an enforceable instrument. Accordingly, the mortgagee may apply directly to the Enforcement court to commence enforcement proceedings against the mortgaged property.<\/p>\n<p>In practice, the duration of the enforcement process varies depending on a number of factors, including the legal status of the title deed (e.g., whether it is suspended, subject to an attachment, or otherwise encumbered), the nature and condition of the property (e.g., whether it is vacant land, a developed building, or whether it contains movable assets) and matters affecting the property such as existing lease agreements or disputes concerning ownership.<\/p>\n<p>Accordingly, in practice, enforcement proceedings generally take no less than four months to complete and may extend considerably to one year depending on the specific circumstances of the case and any legal or practical obstacles that arise during the enforcement process.<\/p>\n<p>Under the Saudi Bankruptcy Law (the \u2018<strong>Law\u2019<\/strong>), a further practical issue is the statutory moratorium, which may apply during bankruptcy proceedings. During the moratorium, enforcement actions against the debtor\u2019s assets, including secured assets, are generally stayed. However, the court may permit enforcement against secured assets under specific circumstances, notably where the continuation of the moratorium would inflict material prejudice or severe harm to the secured creditor.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What restructuring and rescue procedures are available in the jurisdiction, what are the entry requirements and how is a restructuring plan approved and implemented? Does management continue to operate the business and \/ or is the debtor subject to supervision? What roles do the court and other stakeholders play?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Law encompasses a number of rescue procedures for distressed businesses, including protective settlement and financial restructuring, as well as the small debtors\u2019 protective settlement and the small debtors\u2019 financial restructuring.<\/p>\n<p>To commence these proceedings, the debtor must be engaged in a commercial, professional, or for-profit activity, and must be in a state of financial distress, insolvency, or potential distress that foreshadows financial difficulty. Furthermore, it must be feasible to sustain operations while settling creditors&#8217; debts within a reasonable timeframe.<\/p>\n<p>Upon commencement of any such procedure, the business management remains vested in the debtor as debtor-in-possession (\u2018<strong>DIP<\/strong>\u2019). However, under the financial restructuring and the small debtors\u2019 financial restructuring procedures, the debtor operates under the supervision of the trustee. This supervision is intended to implement protective measures to prevent the debtor from abusing the procedure or undermining its integrity. In all cases, the debtor remains subject to judicial oversight by the court, and any interested party may object before the court to any action taken by the debtor or the trustee that violates the Law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a debtor in restructuring proceedings obtain new financing and are any special priorities afforded to such financing (if available)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A debtor undergoing restructuring proceedings is legally entitled to secure new financing, which may be obtained on either a secured or unsecured basis. Pursuant to Article 70(1)(b) of the Law, procuring unsecured financing does not require judicial authorisation, provided that the trustee grants prior written approval.<\/p>\n<p>Conversely, obtaining secured financing is contingent upon the approval of both the trustee and the court. In accordance with Article 183 of the Law, the court may approve such financing where it is imperative to sustain the continuity of the debtor\u2019s operations or to safeguard the debtor\u2019s assets.<\/p>\n<p>Furthermore, pursuant to Article 196(b) of the Law, secured financing is afforded a priority status, ranking second overall in the statutory order of priorities for debt distribution.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a restructuring proceeding release claims against non-debtor parties (e.g. guarantees granted by parent entities, claims against directors of the debtor), and, if so, in what circumstances?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No, restructuring proceedings cannot release claims against non-debtor parties, but it does trigger a moratorium on claims extending to the debtor\u2019s personal guarantor throughout the duration of said moratorium. Consequently, no enforcement actions may be initiated against the personal guarantor or their assets to satisfy a debt owed by the debtor. Likewise, the moratorium shall encompass any in-kind guarantor (pledgor) or provider of in-kind security. The foregoing is subject to the court\u2019s discretionary authority to permit the continuation of enforcement actions against a collateralized asset under specific circumstances, notably where the moratorium would inflict severe harm or material prejudice upon the secured creditors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How do creditors organize themselves in these proceedings? Are advisory fees covered by the debtor and to what extent?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Creditors typically organise themselves by forming a creditors\u2019 committee. Under Article 73 of the Law and Article 24 of the Implementing Regulations, the court or the bankruptcy trustee will form a committee representing the major types of creditors. This committee acts as a collective representative of all creditors during the restructuring procedure. The debtor is required to fund the reasonable professional fees of the creditors\u2019 committee as provided for in Article 28 of the Implementing Regulations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the test for insolvency? Is there any obligation on directors or officers of the debtor to open insolvency proceedings upon the debtor becoming distressed or insolvent? Are there any consequences for failure to do so?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>To initiate financial restructuring proceedings, the debtor must be experiencing a financial difficulty that falls into one of three distinct categories, namely (i) likely financial distress; (ii) insolvency; or (iii) bankruptcy.<\/p>\n<p>\u2018Likely financial distress\u2019 refers to a probability of financial difficulty that foreshadows insolvency. It does not require an actual payment default. Rather, it indicates that the debtor is reasonably anticipated to suffer financial difficulties that give rise to a justifiable concern of impending insolvency.<\/p>\n<p>The Law defines insolvency as the cessation of payment on a due and demanded debt upon its maturity date, irrespective of the underlying cause of such cessation. This applies even if the debtor possesses total assets exceeds its total liabilities but the debtor lacks the necessary liquidity to satisfy matured and currently outstanding debts, which is conventionally referred to as \u2018cash-flow insolvency\u2019.<\/p>\n<p>Conversely, bankruptcy signifies that the debtor\u2019s total liabilities exceed the aggregate value of its assets, even if the debtor remains current in satisfying matured debts and has not experienced a cessation of payment. This is conventionally referred to as \u2018balance-sheet insolvency\u2019.<\/p>\n<p>In addition to satisfying one of the aforementioned three criteria, it must be established to the court that the debtor is likely capable of sustaining its business operations and restructuring creditors\u2019 claims within a reasonable timeframe.<\/p>\n<p>Under Saudi Bankruptcy Law, rescue procedures like protective settlement and financial restructuring are generally voluntary options given to a debtor to protect the business before it reaches terminal failure. No consequences if directors or officers of the debtor fail to open insolvency proceedings upon the debtor becoming distressed or insolvent.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What insolvency proceedings are available in the jurisdiction? Does management continue to operate the business and \/ or is the debtor subject to supervision? What roles do the court and other stakeholders play? How long does the process usually take to complete?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As noted above in Q\u200e3, the Law provides for rescue procedures, including protective settlement, financial restructuring, small debtors\u2019 protective settlement and small debtors\u2019 financial restructuring. These procedures are primarily aimed at preserving viable businesses and restructuring creditor claims.<\/p>\n<p>In addition to rescue procedures, the Law encompasses a set of liquidation procedures applicable if the business is experiencing a state of insolvency or bankruptcy, and the continuity of such business is likely to be unfeasible. These procedures include liquidation, small debtors\u2019 liquidation, and administrative liquidation. The latter procedure specifically aims to liquidate a business whose assets are insufficient to cover the liquidation expenses and the trustee\u2019s fees.<\/p>\n<p>Upon the commencement of any liquidation procedure, the debtor shall be divested of its management powers over the business. Consequently, management operations are vested in the trustee under both the liquidation and small debtors\u2019 liquidation procedures, and in the bankruptcy commission (<em>Eisar<\/em>) under the administrative liquidation procedure.<\/p>\n<p>The duration of bankruptcy proceedings, in all their forms, is contingent upon the scale of the bankruptcy, the debtor\u2019s assets, the volume of debts, and their underlying complexities. A substantial volume of liabilities may significantly prolong the execution phase of a protective settlement or a financial restructuring plan. Similarly, a massive asset base may introduce complexities regarding asset disposal and liquidation processes. Consequently, certain procedures\u2014particularly those involving small debtors\u2014may take up to approximately one year to reach a final conclusion. Conversely, in large-scale bankruptcies, the final conclusion of the procedure may extend across a period of three to four years.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What form of stay or moratorium applies in insolvency proceedings against the continuation of legal proceedings or the enforcement of creditors\u2019 claims? Does that stay or moratorium have extraterritorial effect? In what circumstances may creditors benefit from any exceptions to such stay or moratorium?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The moratorium under the Law refers to the stay of lawsuits, judicial proceedings, enforcement actions, and applications to commence bankruptcy proceedings instituted against the debtor, the debtor&#8217;s assets, a personal guarantor, or a provider of <em>in rem<\/em> security.<\/p>\n<p>Any act or disposition undertaken in contravention of the moratorium shall be null and void. The court may order the recovery of any assets disposed of during the moratorium period, without prejudice to the rights of <em>bona fide<\/em> third parties.<\/p>\n<p>The rules governing the moratorium, as well as its duration, vary depending on the applicable bankruptcy procedure, as will be tackled below regarding (i) preventative settlement procedures; (ii) financial restructuring proceedings; and (iii) liquidation.<\/p>\n<p>A.<\/p>\n<p>Regarding preventative settlement, when filing an application to commence preventive settlement proceedings, the debtor may request the court to impose a moratorium. If granted, the moratorium remains in effect for a period of ninety (90) days, which may be extended by one or more periods of thirty (30) days, provided that the aggregate duration of the moratorium does not exceed one hundred and eighty (180) days.<\/p>\n<p>The moratorium may, however, terminate before the expiry of the period specified by the court if the court approves the preventive settlement proposal or if the preventive settlement proceedings are terminated before such period expires. in small debtors preventive settlement proceedings, the maximum duration of the moratorium is ninety (90) days.<\/p>\n<p>The moratorium in preventive settlement proceedings is subject to certain exceptions, which are determined at the court&#8217;s discretion. Where the interests of justice so require, the court may authorise enforcement against the assets of the bankruptcy estate or against the guarantor&#8217;s assets, provided that such enforcement would not adversely affect the continuation of the debtor&#8217;s business or the debtor&#8217;s ability to obtain the approval of creditors and owners for the proposal. The court may also permit enforcement where refusing the request would cause substantial prejudice to a secured creditor that the debtor is unable to compensate, and where such prejudice outweighs any harm that may be suffered by the debtor or the other creditors. In addition, upon the application of any interested party, the court may lift the moratorium with respect to claims in respect of which proceedings had already been commenced before the moratorium came into effect, provided that doing so serves the interests of the debtor and the majority of the creditors.<\/p>\n<p>For financial restructuring proceedings, upon registration of an application to commence financial restructuring proceedings, a moratorium takes effect automatically by operation of law.<\/p>\n<p>The moratorium remains in force for one hundred and eighty (180) days and may be extended by the court, either on its own initiative or upon the request of the bankruptcy trustee or the debtor, for an additional period not exceeding one hundred and eighty (180) days.<\/p>\n<p>The moratorium may nevertheless terminate before the expiry of such period if the court dismisses the application to commence the proceedings, approves the financial restructuring proposal, or orders the termination of the proceedings for any reason before approval of the proposal.<\/p>\n<p>In small debtors\u2019 financial restructuring proceedings, the moratorium remains in effect for one hundred and eighty (180) days and may be extended for an additional period of one hundred and twenty (120) days. The moratorium may terminate earlier if the court dismisses the application to commence the proceedings, if the restructuring proposal becomes effective, or if the proceedings are terminated before the proposal takes effect for any reason.<\/p>\n<p>The moratorium in financial restructuring proceedings is subject to the same exceptions applicable to the moratorium in Preventive Settlement Proceedings.<\/p>\n<p>As to liquidation proceedings, upon registration of an application to commence liquidation proceedings, an immediate and automatic moratorium comes into effect.<\/p>\n<p>The moratorium in liquidation proceedings terminates if the application to commence the proceedings is dismissed or if the court orders the termination of the liquidation proceedings.<\/p>\n<p>Certain exceptions to the moratorium are, however, recognised. The court retains discretion to exclude specific matters from the scope of the moratorium. In particular, with respect to secured debts, the court may authorise enforcement against the assets securing such debts. Likewise, where proceedings relating to a claim had already been commenced before the moratorium took effect, the court may lift the moratorium in relation to such proceedings if doing so serves the interests of the debtor and the majority of the creditors.<\/p>\n<p>Regarding whether moratorium has extraterritorial effect, such moratorium stipulated by the Law is domestic in effect and does not automatically bind foreign courts. However, following the issuance of the Saudi Rules of Cross-Border Bankruptcy Proceedings (the \u2018<strong>Rules<\/strong>\u2019), which are based on the UNCITRAL Model Law on Cross-Border Insolvency, a Saudi officeholder may seek cooperation or recognition abroad, subject to the laws of the relevant foreign jurisdiction .<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How do the creditors, and more generally any affected parties, proceed in such proceedings? What are the requirements and forms governing the adoption of any reorganisation plan (if any)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In financial restructuring procedures, any creditor whose legal rights are affected by the proposal shall have the right to vote thereon, provided that such creditor holds an admitted claim in the schedule of claims.<\/p>\n<p>When preparing the proposal, the debtor shall classify the creditors into distinct classes based on the nature of their debts and the impact of the proposal thereon.<\/p>\n<p>A class of creditors shall be deemed to have accepted the proposal if it is approved by creditors representing two-thirds of the value of the claims of the voting creditors within the same class, provided that such majority includes creditors representing more than half of the value of the claims of non-affiliated creditors.<\/p>\n<p>The court will ratify the proposal if it is accepted by all classes of creditors. Alternatively, the court may impose the proposal across classes through a cross-class cramdown, subject to two conditions. The first is that at least one class of creditors must have accepted the proposal. The second is that the proposal must be approved by creditors representing 50% of the total aggregate value of the claims of the voting creditors across all classes, provided that the court is satisfied that imposing the proposal serves the best interests of the majority of creditors.<\/p>\n<p>In all events, the court must be satisfied that the proposal meets the equity and fairness criteria, including best interests of creditors test. These criteria include ensuring proper voting procedures, providing creditors with adequate information regarding the debtor&#8217;s available alternatives compared to the terms of the proposal, and safeguarding creditors&#8217; rights concerning loss-sharing and the distribution of rights, benefits, and securities. Any creditor that voted against the proposal may object before the court during the ratification hearing if the proposal violates the equity and fairness criteria.<a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How do creditors and other stakeholders rank on an insolvency of a debtor? Do any stakeholders enjoy particular priority (e.g. employees, pension liabilities, DIP financing)? Could the claims of any class of creditor be subordinated (e.g. recognition of subordination agreement)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Law establishes the following statutory priority order, waterfall, for satisfaction of debts:<\/p>\n<ol>\n<li>Fees and expenses of the bankruptcy trustee and the expert (if any), alongside asset disposal and sale expenses.<\/li>\n<li>Debts secured by <em>in rem<\/em> securities, such as mortgages or pledges.<\/li>\n<li>Court-approved secured financing.<\/li>\n<li>Employee wages for a period of 30 days.<\/li>\n<li>Family alimony prescribed pursuant to a statutory provision or judicial judgment.<\/li>\n<li>Expenses necessary for the continuation of the debtor&#8217;s business operations during the procedure.<\/li>\n<li>Pre-existing\/past employee wages.<\/li>\n<li>Unsecured debts (ordinary claims).<\/li>\n<li>Unsecured government fees, contributions, taxes, and dues.<\/li>\n<\/ol>\n<p>The ranking of debts within each respective priority class shall be governed by the provisions of the relevant laws. For instance, where multiple mortgagees hold security interests over the same asset, reference shall be made to the provisions of the Real Estate Mortgage Law to determine their respective seniority and priority.<\/p>\n<p>Subordination agreements among concerned parties are generally permissible, provided they do not violate public policy or mandatory statutory provisions. By way of example, a secured creditor may consent to the creation of a new security interest ranking <em>pari passu<\/em>, or senior to, its existing security interest.<a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a debtor\u2019s pre-insolvency transactions be challenged? If so, by whom, when and on what grounds? What is the effect of a successful challenge and how are the rights of third parties impacted?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Law contains special provisions governing the period preceding the commencement of any bankruptcy proceeding, commonly referred to in insolvency practice as the suspect period, through the mechanism of avoidance actions that may brought be by any interested party.<\/p>\n<p>The Law provides that transactions entered into by the debtor during the 12 months preceding the commencement of bankruptcy proceedings may be challenged. This look-back period is extended to 24 months, where the transaction involves an affiliated party.<\/p>\n<p>For the purposes of the Law, an affiliated party includes any person having a familial, employment, managerial, or control relationship with the debtor, including:<\/p>\n<ol>\n<li>The debtor&#8217;s manager, members of its board of directors or persons of equivalent status, the debtor&#8217;s partners and owners, and the relatives of such persons and of the debtor up to the third degree of kinship.<\/li>\n<li>Any person having an employment relationship with the debtor.<\/li>\n<li>Any person who, together with the debtor, is directly or indirectly controlled by another person or persons holding more than 50% of the capital of each of them.<\/li>\n<li>Any person who directly or indirectly controls the debtor through ownership representing more than 50% of the debtor&#8217;s capital.<\/li>\n<li>Any person directly or indirectly controlled by the debtor through ownership representing more than 50% of that person&#8217;s capital.<\/li>\n<\/ol>\n<p>In addition to prescribing the applicable look-back period, the Bankruptcy Law specifies the categories of transactions that may be challenged, including:<\/p>\n<ol>\n<li>The assignment or waiver, in whole or in part, of assets, rights, or security interests.<\/li>\n<li>The conclusion of a transaction involving the premature settlement of debts or their settlement on unfair terms.<\/li>\n<li>The conclusion of a transaction for no consideration or for consideration that is less than fair value.<\/li>\n<li>The provision of security for obligations that were not owed by the debtor.<\/li>\n<li>The full or partial release of a debtor from its obligations.<\/li>\n<\/ol>\n<p>In all cases, the transaction must not have served the interests of the debtor, and it must be established that the debtor was either distressed or bankrupt at the time the transaction was entered into.<\/p>\n<p>To ensure commercial certainty, the Law imposes a limitation period requiring any avoidance action to be commenced within 24 months from the commencement of the bankruptcy proceeding. Where the challenge is upheld, the court may declare the impugned transaction null and void and order the parties to be restored to their pre-transaction position, including the recovery of transferred assets, without prejudice to the rights of <em>bona fide<\/em> third parties.<\/p>\n<p>Where the court finds that the statutory requirements for avoidance have been satisfied, it shall declare the challenged transaction void and may order one or more of the following remedies:<\/p>\n<ol>\n<li>Recovery of the transferred asset together with any income, profits, or fruits generated from its use or exploitation.<\/li>\n<li>Where recovery of the asset is impossible, for example, because it has been destroyed, consumed, or transferred to a <em>bona fide<\/em> third party, the transferee may be ordered to pay the fair value of the asset. However, where the transferee was a party to the impugned transaction with the debtor, the Law denies the protection afforded to bona <em>fide third<\/em> parties, with the result that the consequences of avoidance remain enforceable against that transferee.<\/li>\n<li>Recovery of any security provided by the debtor, including by cancelling the registration of security interests or recovering possession of pledged assets where possession has passed to the secured creditor, as the case may be.<\/li>\n<li>Requiring a guarantor who has been released from its guarantee to reinstate the guarantee to its previous status, including by taking all necessary steps to re-register the relevant security interest or to restore possession of the pledged asset to the bankruptcy trustee or liquidator, as applicable.<\/li>\n<li>Where reinstatement of the security is impossible, for example because the secured asset has been destroyed or title has passed to a <em>bona fide<\/em> third party, the guarantor may be required to provide substitute security having a value and priority no less favourable than the original security.<\/li>\n<li>Requiring any person who received monetary payments from the debtor to remit such amounts to the liquidator for inclusion in the assets of the bankruptcy estate.<\/li>\n<\/ol>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are existing contracts treated in restructuring and insolvency processes? Are the parties obliged to continue to perform their obligations? Will termination, retention of title and set-off provisions in these contracts remain enforceable? Is there any ability for either party to disclaim the contract?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The treatment of existing contracts under the Law is summed up in four main points, namely that (i) contracts generally continue notwithstanding the commencement of restructuring or insolvency proceedings; (ii) the trustee may terminate certain burdensome contracts in financial restructuring proceedings; (iii) ipso facto termination clauses and set-off are restricted; and (iv) retention of title clauses remain generally enforceable if valid under the applicable law.<\/p>\n<p>As a general rule, the commencement of the financial restructuring procedure does not automatically terminate contracts to which the debtor is a party. It also does not relieve the debtor from performing its contractual obligations. However, the trustee may terminate any contract (i) if the trustee deems such termination to be in the interest of executing the financial restructuring plan and achieving the interests of the creditors, and (ii) provided that it does not cause material harm to the counterparty contracting with the debtor.<\/p>\n<p>Consequently, the debtor shall, immediately upon the trustee&#8217;s appointment, submit to the trustee a list of its valid and binding contracts along with their particulars, copies thereof, and a report stating whether the debtor wishes to terminate any such contracts and the justifications thereof. The trustee may request from the debtor any information or documents relating to the contracts, and the debtor shall provide the trustee with the requested information or documents within a reasonable period specified by the trustee.<\/p>\n<p>This power, however, is subject to the above criteria as well as a number of substantive and procedural conditions including notice to the counterparty and the counterparty\u2019s right to object before the court. The termination right is also time-limited to a period of 60 days only from the date of the commencement of the financial restructuring procedure, which may be extended by the court upon request for a period not exceeding 30 days.<\/p>\n<p>Nonetheless, the trustee\u2019s termination powers do not apply to certain exempt contracts, including government procurement contracts concluded by government entities with the debtor, as well as financing agreements concluded by banking companies or financing institutions with the debtor.<\/p>\n<p>The contract shall be terminated upon the expiry of 30 days from the date of notifying the counterparty of the termination decision, unless the trustee and the counterparty agree on a shorter period for the termination to take effect. However, with respect to the lease agreement of the real estate premises where the debtor conducts its business activities, the termination shall take effect upon the expiry of 90 days from the date of notifying the counterparty of the termination decision, unless the contract provides for a shorter period, provided that the counterparty has not filed an objection against the termination decision before the court.<\/p>\n<p>If the counterparty contracting with the debtor objects to the trustee\u2019s termination decision, the court examines such objection and accept it if the court is satisfied that the termination of the contract is not necessary for the implementation of the plan and the protection of the interests of the majority of creditors, or if it causes material harm to the contracting party. Otherwise, the court will dismiss the objection.<\/p>\n<p>Regarding any automatic <em>ipso facto <\/em>termination clauses that purport to terminate an agreement solely because of the commencement of a preventive settlement or financial restructuring procedure are null, void, and unenforceable. Accordingly, either party cannot disclaim the contract automatically by virtue of bankruptcy proceedings.<\/p>\n<p>Automatic set-off is also generally prohibited in relation to the debtor\u2019s assets or accounts, subject to the statutory exceptions for certain financial transactions. As for retention of title clauses, they are not invalidated merely by commencement of bankruptcy proceedings. A validly executed retention of title clause should therefore remain enforceable.<a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What conditions apply to the sale of assets \/ the entire business in a restructuring or insolvency process? Does the purchaser acquire the assets \u201cfree and clear\u201d of claims and liabilities? Can security be released without creditor consent? Is credit bidding permitted? Are pre-packaged sales possible?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A financial restructuring plan may include the sale of certain assets to satisfy specific debts or for other purposes. This is permissible if the proposal is approved by the requisite creditors and ratified by the court, after which compliance with the provisions of the plan is mandatory. If the assets are encumbered by a mortgage or pledge, the secured creditor&#8217;s rights must be satisfied first, and any remaining surplus shall be deposited into the debtor\u2019s account. The consent of the secured creditor is not required for such a sale if the sale is provided for in the plan. However, the proposal must not violate the Law or any relevant regulations regarding debt priorities, otherwise, that specific part of the proposal shall be deemed null and void.<\/p>\n<p>In a liquidation proceeding, the bankruptcy trustee must commence the sale of assets once the judgment opening the proceeding becomes final. The Law does not currently provide an express pre-packaged sale of assets regime in liquidation proceedings. The trustee may sell the bankruptcy estate&#8217;s assets <em>en bloc<\/em>. The sale encompasses both encumbered and unencumbered assets. The sale of an encumbered asset is not contingent upon the consent of the secured creditor. However, in the event of selling an encumbered asset, the secured creditor has priority to satisfy its debt from the sale proceeds ahead of any other creditor. If the proceeds are insufficient to fully satisfy the secured creditor&#8217;s debt, the creditor shall rank as an unsecured creditor <em>pari passu<\/em> for the remaining balance of its debt.<\/p>\n<p>Credit bidding, in the technical sense used in some jurisdictions, is not expressly regulated. A creditor may participate in a public auction for bankruptcy assets. However, if the assets are sold through other methods, such as a direct sale by the trustee, creditor participation might be restricted.<\/p>\n<p>Whether an encumbered asset is sold in a restructuring or liquidation process, the transaction results in the discharge of the asset from any ancillary rights attached to that asset, so that the purchaser acquires it &#8220;free and clear&#8221; of those rights.<a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What duties and liabilities should directors and officers be mindful of when managing a distressed debtor? What are the consequences of breach of duty? Is there any scope for other parties (e.g. director, partner, shareholder, lender) to incur liability for the debts of an insolvent debtor and if so can they be covered by insurances?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Directors and officers of a distressed debtor should be mindful of three broad categories of risk, including (i) their general corporate duties under the Companies Law; (ii) their obligation not to circumvent the Bankruptcy Law where the company is insolvent or unable to satisfy its debts; and (iii) potential civil, criminal or administrative liability for misconduct during financial distress.<\/p>\n<p>Under the Saudi Companies Law, directors must act in good faith, exercise the care expected of a reasonably prudent person, and act in the best interests of the company. During periods of financial distress, these duties require directors to prioritise the preservation of the company&#8217;s value and the interests of its stakeholders, rather than personal or conflicting interests.<\/p>\n<p>Where a company has become insolvent or is otherwise unable to satisfy its financial obligations, directors may not circumvent the insolvency regime by proceeding with an ordinary voluntary liquidation. Instead, they are required to seek the appropriate relief under the Saudi Bankruptcy Law by commencing the applicable bankruptcy procedure before the competent court.<\/p>\n<p>Further, Saudi Companies law imposes significant civil and criminal consequences on directors who fail to discharge their statutory duties during financial distress. Personal liability in this context may arise in many ways, including (i) civil liability for breach of directors\u2019 duties or mismanagement; (ii) liability for improperly bypassing the bankruptcy framework; (iii) criminal or administrative sanctions for serious misconduct; and (iv) liability of other persons where the law imposes responsibility for the debts of the insolvent debtor.<\/p>\n<p>As to civil liability, directors are jointly and severally liable to compensate the company, shareholders, or third parties for losses resulting from breaches of the Companies Law, the company&#8217;s constitutional documents, or their fiduciary duties.<\/p>\n<p>Further, a director who proceeds with an ordinary liquidation despite knowing that the company is insolvent or unable to satisfy its debts may incur personal liability for the company&#8217;s outstanding obligations, as such conduct constitutes a breach of the mandatory insolvency framework.<\/p>\n<p>The Law also prescribes severe sanctions for directors who engage in fraudulent or grossly improper conduct in connection with a company&#8217;s financial distress. These sanctions include imprisonment for a period of up to five years, fines of up to SAR 5 million, and a judicial order prohibiting the individual, for a period of up to five years, from managing, voting in, or holding managerial interests in any for-profit company established in the Kingdom.<\/p>\n<p>The previous sanctions and consequences rise as a result of conduct that raises claims of criminal liability. Within such criteria, directors may be subject to criminal prosecution where they engage in conduct intended to prejudice creditors or abuse the insolvency process, including:<\/p>\n<ol>\n<li>Misappropriation or concealment of assets by transferring, dissipating, concealing, or otherwise placing company assets beyond the reach of creditors.<\/li>\n<li>Reckless trading, including incurring additional liabilities despite knowing that there is no reasonable prospect of avoiding insolvency or liquidation.<\/li>\n<li>Preferential treatment of creditors, including selectively repaying favoured creditors or related-party debts in violation of the statutory order of priority.<\/li>\n<li>Falsification of records, including the destruction, alteration, concealment, or fabrication of accounting records or the submission of false or misleading information to the competent court or the Bankruptcy Commission.<\/li>\n<\/ol>\n<p>Saudi law expressly permits companies to obtain directors&#8217; and officers&#8217; liability insurance. Article 28(3) of the Companies Law authorises companies to procure insurance covering directors against civil claims arising from the performance of their corporate duties.<\/p>\n<p>Such insurance may cover directors&#8217; civil liability, including defence costs and compensation payable in respect of covered claims, subject to the terms of the policy. However, criminal liability, criminal fines, and other penal sanctions arising from fraud or criminal misconduct cannot be insured or indemnified as a matter of Saudi law and public policy.<\/p>\n<p>Other persons may also incur liability where the law provides an independent basis for doing so. For example, under Article 120 of the Law, when liquidating bankruptcy assets, the officeholder takes into account the limitation of liability of owners\u2019 liabilities in accordance with the provisions of relevant regulations. Jointly liable owners are liable for covering any shortfall in the bankruptcy assets if the sale proceeds thereof are insufficient to satisfy the bankruptcy debts. The officeholder requests in writing that the owners satisfy the bankruptcy debts on the date determined by the officeholder, and any amounts paid by the owners will be added to the bankruptcy assets. If the owners fail to make payment, the officeholder may apply to the court seeking a payment order against them.<\/p>\n<p>By contrast, shareholders of a joint-stock company are generally not personally liable for the company&#8217;s debts beyond the value of their respective shareholdings, consistent with the principle of limited liability.<a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do restructuring or insolvency proceedings have the effect of releasing directors and other stakeholders from liability for previous actions and decisions? In which context could the liability of the directors be sought?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No, restructuring or insolvency proceedings under Saudi law do not automatically release directors, managers, or other stakeholders from personal liability for their previous actions and decisions. In fact, initiating bankruptcy or liquidation procedures often heightens legal scrutiny regarding past management conduct, exposing board members and executives to potential civil or criminal liabilities if wrongdoing or gross negligence is uncovered.<\/p>\n<p>The liability of directors may be pursued through the following avenues:<\/p>\n<ol>\n<li>The company may bring a derivative action against a manager or members of the board of directors to recover any loss or damage suffered by the company because of their breach of duty or misconduct.<\/li>\n<li>One or more partners or shareholders holding at least 5% of the company&#8217;s capital, or such lower threshold as may be prescribed by the company&#8217;s articles of incorporation or articles of association, may bring a derivative action on behalf of the company where the company has failed to do so. Such action is permissible provided that it serves the company&#8217;s interests, is based on valid grounds, is brought in good faith, and the claimant was a partner or shareholder at the time the action commenced.<\/li>\n<\/ol>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Will a local court recognise foreign restructuring or insolvency proceedings over a local debtor? What is the process and test for achieving such recognition? Does recognition depend on the COMI of the debtor and\/or the governing law of the debt to be compromised? Has the UNCITRAL Model Law on Cross Border Insolvency or the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments been adopted or is it under consideration in your country?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As noted above, Saudi Arabia issued the Rules based on the UNCITRAL Model Law on Cross-Border Insolvency. Saudi Arabia has not yet adopted the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments, although its adoption is currently under consideration.<\/p>\n<p>Article 8 of the Rules of Cross-Border Bankruptcy governs applications for the recognition of foreign insolvency or restructuring proceedings. A foreign representative may apply to the competent court for recognition of the foreign proceeding in which they have been appointed. The application must be accompanied by:<\/p>\n<ol>\n<li>a copy of the decision commencing the foreign proceeding and appointing the foreign representative;<\/li>\n<li>a certificate issued by the foreign court confirming the existence of the foreign proceeding and the appointment of the foreign representative; and<\/li>\n<li>a statement identifying any foreign proceedings concerning the debtor known to the foreign representative.<\/li>\n<\/ol>\n<p>Where the documents submitted establish that the proceeding and the representative fall within the definitions of a \u2018foreign proceeding\u2019 and a \u2018foreign representative\u2019 under Article 1 of the Rules, the court is entitled to presume that those requirements are satisfied.<\/p>\n<p>For the purposes of the Rules, \u2018Foreign proceeding\u2019 means a collective judicial or administrative proceeding in a foreign state, including an interim proceeding, conducted pursuant to insolvency legislation, in which the debtor&#8217;s assets and affairs are subject to the control or supervision of a foreign court for the purpose of reorganisation or liquidation. \u2018Foreign representative\u2019 means a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or liquidation of the debtor&#8217;s assets or affairs, or to act as the representative of the foreign proceeding.<\/p>\n<p>The Rules further provide that:<\/p>\n<ol>\n<li>the court may accept the documents submitted in support of the application irrespective of whether they have been legalised;<\/li>\n<li>where the prescribed documents are unavailable, any other evidence establishing the existence of the foreign proceeding and the appointment of the foreign representative may be submitted, and the court retains discretion to accept or reject such evidence;<\/li>\n<li>the court may require that the supporting documents be translated into Arabic; and<\/li>\n<li>unless proven otherwise, the debtor&#8217;s registered office (or habitual residence, in the case of an individual) is presumed to constitute the debtor&#8217;s centre of main interests (COMI).<\/li>\n<\/ol>\n<p>Upon recognition, a foreign proceeding will be classified as either (i) a foreign main proceeding, where the proceeding is taking place in the state in which the debtor has its centre of main interests (COMI); or (ii) a foreign non-main proceeding, where the proceeding is taking place in a state other than the debtor&#8217;s COMI, provided that the debtor carries out a non-transitory economic activity in that state with human means and goods or services.<\/p>\n<p>This distinction, set out in Articles 1(2) and 12 of the Rules is significant because the relief available upon recognition differs depending on whether the foreign proceeding is recognised as a main or non-main proceeding.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">For EU countries only: Have there been any challenges to the recognition of English proceedings in your jurisdiction following the Brexit implementation date? If yes, please provide details.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>N\/A<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can debtors incorporated elsewhere enter into restructuring or insolvency proceedings in the jurisdiction? What are the eligibility requirements? Are there any restrictions? Which country does your jurisdiction have the most cross-border problems with?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A debtor incorporated outside Saudi Arabia may enter into Saudi restructuring or insolvency proceedings where there is a sufficient statutory connection with the Kingdom. Pursuant to Article 4 of the Law, a foreign debtor falls within the scope of the Law where the following conditions are satisfied:<\/p>\n<ol>\n<li>the debtor is either a natural person or a legal entity;<\/li>\n<li>the debtor owns assets in the Kingdom or carries on a commercial, professional, or other profit-generating activity; and<\/li>\n<li>such activity is conducted through an entity licensed in the Kingdom of Saudi Arabia.<\/li>\n<\/ol>\n<p>The principle restriction is a territorial one. Under Article 4, the Law applies only to the debtor&#8217;s assets located within the Kingdom of Saudi Arabia. Accordingly, the Saudi courts&#8217; jurisdiction under the Law is confined to assets situated in the Kingdom and does not extend to the debtor&#8217;s assets located outside Saudi Arabia.<\/p>\n<p>Regarding the cross-border jurisdiction problems, there is no public granular data or a breakout statistic tracking the exact number of cross-border case filings, requests, or recognitions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are groups of companies treated on the restructuring or insolvency of one or more members of that group? Is there scope for cooperation between office holders? For EU countries only: Have there been any changes in the consideration granted to groups of companies following the transposition of Directive 2019\/1023?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Saudi law does not currently provide a comprehensive enterprise group insolvency regime or a general substantive consolidation mechanism. However, the Law allows the court, in certain circumstances, to subject another person to the same financial restructuring or liquidation procedure where the statutory conditions are satisfied.<\/p>\n<p>Under Article 49(1) of the Law, in a financial restructuring procedure, and Article 126 for liquidations procedures, the court may order that another person be subjected to the same procedure where all of the following conditions are satisfied:<\/p>\n<ol>\n<li>The conditions for commencing the financial restructuring procedure are met in respect of that person.<\/li>\n<li>Subjecting that person to the same procedure serves the interests of both the debtor and the other person.<\/li>\n<li>Conducting separate proceedings for each of them would be excessively costly or impracticable.<\/li>\n<li>The rights of the debtor&#8217;s creditors and the creditors of the other person are adequately protected.<\/li>\n<\/ol>\n<p>The same applies to the small debtor financial restructuring procedure and the small debtor liquidation procedure pursuant to the referral provisions under Articles 159 and 166, respectively.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is your country considering adoption of the UNCITRAL Model Law on Enterprise Group Insolvency?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>UNCITRAL Model Law on Enterprise Group Insolvency has not yet been adopted. However, Saudi legislation places significant emphasis on studying international best practices and drawing upon model laws in the preparation and development of legislation, particularly the work of the United Nations Commission on International Trade Law (UNCITRAL). This approach is reflected in Council of Ministers Resolution No. 713 dated 30\/11\/1438H, which provides that explanatory memoranda accompanying draft legislation should include an overview of the foreign legislation and international experiences relied upon in its preparation, together with the key legislative provisions drawn from them. The Resolution also requires due consideration to be given to relevant model laws, soft law instruments, and regional and international customary standards relating to the subject matter of the proposed legislation, insofar as they are consistent with the objectives of the legislation proposed.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any proposed or upcoming changes to the restructuring \/ insolvency regime in your country?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Proposed amendments to the Law have been published for public consultation on the <em>Istitlaa <\/em>Platform operated by the National Competitiveness Center. The proposed reforms include the following:<\/p>\n<ol>\n<li>Strengthening the \u2018best interests of creditors\u2019 test by requiring the debtor, in a financial restructuring procedure, to include in the restructuring proposal a hypothetical liquidation analysis. This would ensure that a dissenting creditor receives under the financial restructuring plan no less than it would be expected to recover in a liquidation scenario if the restructuring failed.<\/li>\n<li>Introducing a pre-packaged financial restructuring procedure, allowing a restructuring plan to be negotiated and agreed upon with the requisite creditors before the formal commencement of the procedure, thereby facilitating a more efficient and expedited restructuring process.<\/li>\n<\/ol>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is your jurisdiction debtor or creditor friendly and was it always the case?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Saudi bankruptcy regime represents a balanced and modern framework that seeks to preserve viable businesses while safeguarding the interests of creditors. Rather than favouring either debtors or creditors, the Law aims to strike an appropriate balance between facilitating corporate rescue and protecting the rights of capital providers.<\/p>\n<p>From the debtor&#8217;s perspective, the Law provides a comprehensive set of restructuring tools for businesses experiencing financial distress. Most notably, the commencement of financial restructuring proceedings triggers a statutory moratorium on enforcement actions, affording the debtor essential breathing space to negotiate and implement a restructuring plan. The regime also adopts a DIP model, allowing existing management to retain control over the day-to-day operation of the business, subject to statutory safeguards and judicial oversight. In addition, the Law incorporates a cross-class cramdown mechanism, enabling the court to confirm a restructuring plan notwithstanding the objection of one or more creditor classes, provided that the statutory conditions are satisfied, including approval by at least one impaired class of creditors and creditors representing more than 50% of the total voting debt, and that the plan is fair and equitable.<\/p>\n<p>At the same time, the Saudi framework incorporates robust protections for creditors to preserve market confidence and ensure equitable treatment. Secured creditors benefit from explicit statutory recognition of their priority rights and specific safeguards designed to protect the value of their collateral throughout the proceedings. The Law also prohibits a restructuring plan from altering the statutory order of priority among creditors. To maximise value for the estate, the regime authorises avoidance actions that enable the court to set aside fraudulent, preferential, or otherwise detrimental transactions entered into during the statutory suspect period preceding the commencement of bankruptcy proceedings. Furthermore, creditors are afforded an active role in the bankruptcy process through the establishment of creditors&#8217; committees, which provide oversight, enhance transparency, and facilitate meaningful creditor participation.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do sociopolitical factors give additional influence to certain stakeholders in restructurings or insolvencies in the jurisdiction (e.g. pressure around employees or pensions)? What role does the State play in relation to a distressed business (e.g. availability of state support)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Saudi bankruptcy regime is principally governed by statutory rules rather than by informal sociopolitical pressure. However, the Law reflects certain public policy objectives according preferential treatment to particular categories of claims.<\/p>\n<p>In particular, employees receive preferential treatment in respect of employment-related entitlements, which rank ahead of ordinary unsecured claims. Similarly, court-ordered alimony is afforded priority over general unsecured debts. These priorities reflect the legislature&#8217;s policy of protecting vulnerable stakeholders while maintaining the overall integrity and predictability of the insolvency framework.<\/p>\n<p>The Saudi government plays an active role in supporting financially distressed businesses through targeted fiscal relief measures and sector-specific development funds aimed at preserving business continuity and economic stability. The court supervises bankruptcy proceedings, while the Bankruptcy Commission (Eisar) plays an important role in administering and developing the bankruptcy framework, issuing guidance, raising awareness, and supporting the practical implementation of the regime.<\/p>\n<p>Outside the Bankruptcy Law, distressed businesses may in practice benefit from general fiscal, regulatory or sector-specific support measures, depending on the nature of the business and the applicable programme. These may include tax payment arrangements or instalment plans through the Zakat, Tax and Customs Authority (ZATCA), financing support or loan rescheduling through sectoral development funds such as the Saudi Industrial Development Fund (SIDF) or the Tourism Development Fund (TDF), and employment-related support through the Human Resources Development Fund (HRDF).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the greatest barriers to efficient and effective restructurings and insolvencies in the jurisdiction? Are there any proposals for reform to counter any such barriers?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While the Saudi bankruptcy framework is modern and comprehensive, its continued effectiveness depends on further strengthening certain practical aspects of its implementation.<\/p>\n<p>The principal legislative proposals are the proposed amendments discussed in Q\u200e22. In addition, we observe that more active and informed creditor participation might be a notable area for improvement. The effectiveness of any restructuring framework depends on constructive creditor engagement. Continued efforts to encourage timely and meaningful participation by creditors would improve the prospects of consensual restructurings and reduce unnecessary disputes.<\/p>\n<p>Enhanced awareness of the bankruptcy framework. Although the Bankruptcy Law has become increasingly established, further awareness among businesses, lenders, professional advisers, and the wider commercial community would encourage earlier use of restructuring procedures, enabling financially distressed businesses to seek relief before insolvency becomes irreversible.<\/p>\n<p>Further electronic integration between the judiciary and government authorities. Expanding electronic integration between the bankruptcy courts and relevant government entities would accelerate the implementation and enforcement of judicial decisions, reduce administrative delays, improve information sharing, and enhance the overall efficiency of insolvency proceedings.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">8413<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/145148","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=145148"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}