Purpose of the Bankruptcy Law

There has also been little or no effective protection for a debtor whose business is facing financial difficulties, but which remains financially viable. In practice, where there are several creditors there may be no scope for that debtor to trade his way out of those difficulties and restore the financial health of his business. However, preserving the business in some form may be in the best interests of most if not all creditors and this especially the case with small creditors – even if it means receiving less than their due.

The Law aims to:

  • Help a bankrupt or insolvent debtor who is expected to suffer financial disruption to reorganize his financial position, resume his activities and contribute to economic support and development
  • Ensure fair consideration of creditors’ rights and ensuring the equitable treatment
  • Maximize the value and regular sale of assets in bankruptcy, as well as ensure fair distribution thereof to creditors upon liquidation
  • Reduce the cost and length of legal proceedings and enhance their effectiveness and
  • Provide a simplified liquidation of debtors whose assets, if sold, are not expected to be sufficient to meet the expenses of liquidation.


  • Individuals/ Corporations carrying on commercial, professional or for-profit businesses in Saudi Arabia and
  • Non-Saudi investors who have assets in Saudi Arabia or carry on commercial, professional or for-profit business through a licensed entity.

Financial Restructuring:

Procedure that aims at facilitating the debtor’s coming to terms with his creditors regarding the financial restructuring of his business under supervision of a Financial Restructuring Officer. The debtor, a creditor or the regulator of the debtor, may make the financial restructuring application. If the court approves the Financial Restructuring application, it will appoint a trustee (the Financial Restructuring Officer) who will, amongst other things, supervise the debtor’s activity during the financial restructuring to ensure fairness of the procedure and its execution.


The debtor, a creditor or the regulator of the debtor may apply to the court to initiate a liquidation procedure for the debtor if the debtor is insolvent or bankrupt. A liquidation trustee is appointed, and the trustee will assume the management of the debtor’s assets. Liquidation will result in the assets of the bankrupt being sold and the proceeds distributed amongst the creditors under the management of a liquidation trustee. The liquidation trustee will liquidate the debtor’s assets, list debts, and distribute proceeds of liquidation between creditors according to their debt’s priority.