The Saudi Kingdom is embarking on an intensive drive to overhaul its economy, including updating its outdated laws.
Saudi Arabia’s cabinet has approved a bankruptcy law, sources familiar with the matter said on Sunday 18th February, 2018. This gives a boost to the efforts to make the Kingdom more peaceful, comfortable and enticing to investors and business visitors.
Modern bankruptcy laws were non existent in Saudi Arabia, creating difficulties and problems for struggling companies seeking to restructure their debts especially since the 2009 global financial crisis and more recently the dip in oil prices.
The Kingdom is now embarking on a very good and intensive drive to overhaul its economy including updating its laws to fall in line with what is prevailing in advance economies. This comes especially as it seeks to create an investor friendly climate to push through a multi-billion dollar pipeline of asset sales such as the Initial Public Offering (ICO) of Saudi Aramco, expected to be the world’s largest public share sale.
The timing is excellent, said Bader Al Busaies, managing partner at Al Suwaiket and Al Busaies law firm.
Lots of companies are facing financial difficulties and problems. Prior to the new bankruptcy legislation, businesses had to either resort to liquidation or find stakeholders who’d inject money to bail them out.
Analysts believe that the new law is an alternative solution as international best practices have proven that insolvency laws offer a good solution to companies and make them improve their work.
King Salman endorsed the bankruptcy law after the cabinet passed its approval, a source revealed citing a confidential document on the matter.
The Saudi Ministry of Commerce and Investment did not immediately respond to a request for comment, and it was unclear when the law will come into effect.
Saudi Arabia’s Shura council, a top advisory body to the government, in December approved a draft of the law which consisted of two hundred and thirty one (231) articles in 7 chapters. It regulated bankruptcy procedures such as settlements and liquidation, for individuals as well as local and foreign companies, according to a government statement at the time.
No details of the framework of the new law have yet been released but an earlier draft version created a provision whereby approval of a debt restructuring deal could be achieved if at least two thirds of the creditors were in agreement.