By Sarah Townsend
Proposed new legislation focuses on restructuring to give lifeline to struggling businesses
The government of Saudi Arabia plans to overhaul its bankruptcy laws and has held a series of workshops to seek public views on proposed changes.
The Ministry of Commerce and Investment (MCI) said on its website that it had sought the opinion of businesses and public sector bodies on a new bankruptcy system and its implementation.
Broad plans to reform existing legislation and create a more robust insolvency framework to support private sector growth were contained in the kingdom’s Vision 2030 and National Transformation Program 2020.
According to the MCI, the topics under discussion include preventive settlement measures, financial reorganisation, liquidation, procedures for small debtors, performed administrative liquidation, and other bankruptcy procedures that would need to be covered in a new law.
Maher Othman, bankruptcy system project manager at the MCI, told workshop delegates that a draft bankruptcy law already on the table has 320 articles.
It gives priority to preventive settlement and financial restructuring measures, which aim to resolve the difficulties facing debtors, rather than penalising them, and enable them to resume business as soon as possible, Othman reportedly said.
During the meeting, it was also proposed that the proportion of debt financing in a “viable” project be raised to minimise exposure to a funder who could default.
Bader Al-Haddab, general supervisor of the Agency of Technical Affairs at the MCI, was quoted as telling local media after last week’s workshop that the bankruptcy reform initiative had been launched “to find a way of enabling defaulter projects to overcome the financial difficulties so that they can continue its practice, or choose liquidation”.
“This suggestion will preserve the rights of debtors and other stakeholders to enhance confidence in business and financial transactions,” he said.