Riyadh – Mubasher: Saudi Arabia’s new bankruptcy law is expected to go into effect in late August, officials have said.
The law is forecast to attract more local and international investments, especially in the private sector, as well as contribute to reforming the GCC country’s economy.
Moreover, the law, which comprises 17 chapters including 231 items, will provide protection to embattled firms and creditors in a bid to balance between investors and creditor interest, and lay out bankruptcy proceedings.
“The law tries to find the perfect balance between the interests of investors and creditors and allows indebted corporations to maintain their operations while gradually settling their debts,” Dario Najm, an associate in the corporate and M&A practice of Ahmad bin Hezeem and Associates in Saudi Arabia stated in an online legal note.
In the same vein, it will encourage the small and medium-sized enterprises (SMEs) to invest in the Saudi bourse, in addition to allowing the kingdom to deal professionally with firms that face financial problems, Najm added.
Najm expected that the law would start to be implemented on 18 August.
“Although the first draft of the bankruptcy law was introduced in 2016 and has been under study for almost two years, the long consultations ended up the favour of both the investors and the creditors as the end product drafted by the legislator emulates those used in developed and industrial countries,” Najm indicated.
In February, the Saudi cabinet announced approving a bankruptcy law in an effort to diversify economy, while King Salman bin Abdulaziz endorsed the law after the cabinet’s approved.
