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The Kingdom of Saudi Arabia overhauled its corporate insolvency framework in 2018 with the introduction of a new bankruptcy law. In this client alert we examine the new Bankruptcy law in detail.
Executive Summary
The bankruptcy law that came into effect in the Kingdom of Saudi Arabia in 2018 reshaped the legal landscape with regards to the restructuring and liquidation of companies in the Kingdom. It established the framework for the administration of restructuring and liquidation procedures in Saudi Arabia, through the Commercial Courts and a newly formed Bankruptcy Commission. In addition, it set out a number of clearly defined restructuring and liquidation procedures to which a company may be subject, depending on its circumstances, ranging from solvent restructurings to accelerated liquidation procedures, as well as clearly setting out the priority of debts on a liquidation. A number of companies have been restructured or are undergoing liquidation pursuant to the new bankruptcy law and important indicators of how the new law will be applied by the courts have become available. While it remains too early to form a definitive view as to the efficacy of the new bankruptcy law, it is hoped that (i) the new bankruptcy law will cause distressed businesses to view solvent restructurings as a generally viable option and (ii) competing creditors' claims will be effectively managed, particularly in complex restructurings.