Saudi Arabia has confirmed its’ first comprehensive bankruptcy law will be implemented officially from August 18 to encourage foreign and domestic investment in the private sector.
The new law is expected to increase competition and jobs in a move to increase knowledge and skill transfer in this modernizing economy.
Bankruptcy law has long been needed in the Kingdom and was established to help protect creditors, such as banks and bankrupt companies that want to finish business in the Kingdom in an orderly manner.
“The new regulations will offer lenders, firms and their executives peace of mind and spur overseas investment in the private sector,” said Dario Najm, an associate in the corporate and M&A practice at BSA Ahmad Bin Hezeem & Associates LLP in Riyadh.
Until now, there has been no clear procedure for filing for bankruptcy in the Kingdom and this will generate confidence in the market and help bring in foreign direct investment to expand the private sector.
Najm also mentioned many investors had been anticipating this new law before making investments in the Kingdom.
He continued, the new laws will encourage the creation of new enterprises and medium-sized businesses, knowing that there is now a formal system for them to liquidate the company or recover by repaying the debt should they go bankrupt.
A Saudi Ministry of Commerce and Investment official confirmed that the bankruptcy law would be implemented in five weeks.