Saudi government approves bankruptcy law to boost reform


DUBAI / KHOBAR, Saudi Arabia (Reuters) – The Saudi cabinet has approved a bankruptcy law, sources familiar with the matter said on Sunday, stepping up efforts to make the kingdom more attractive to investors.

FILE PHOTO – King Salman of Saudi Arabia attends a meeting with Russian President Vladimir Putin (not pictured) at the Kremlin in Moscow, Russia on October 5, 2017. REUTERS / Yuri Kadobnov / Pool

Modern bankruptcy laws currently do not exist in Saudi Arabia, creating difficulties for distressed companies seeking to restructure debt with creditors since the global financial crisis of 2009 and, more recently, declining prices of oil.

The kingdom is embarking on an intensive campaign to overhaul its economy – including updating outdated laws – as it seeks to create an investor-friendly climate to push forward a multibillion-dollar pipeline of sales of assets, such as Saudi Aramco’s initial public offering, is expected to be the largest public sale of shares in the world.

“The timing is excellent,” said Bader al-Busaies, managing partner of law firm Al Suwaiket and Al Busaies.

“A lot of businesses are facing financial difficulties. Before it was either the liquidation, or the stakeholders had to inject money. The new law is an alternative solution – international practice has proven that insolvency law offers a good solution for businesses.

King Salman approved the bankruptcy law after the cabinet approved it, the sources said, citing a document dated last week.

The Ministry of Trade and Investment did not immediately respond to a request for comment, and it was not clear when the law would be enacted and come into force.

Saudi Arabia’s Shura Council, a prominent advisory body to the government, approved a bill in December consisting of 231 articles divided into 17 chapters. It regulated bankruptcy proceedings such as settlements and liquidation, for individuals as well as local and foreign businesses, according to a government statement at the time.

No details of the law’s framework have yet been released, but an earlier version of the draft created a provision whereby approval of a debt restructuring deal could be obtained if at least two-thirds of creditors approved. the plan.

This could help resolve existing troubled debt disputes, such as the one facing Ahmad Hamad Algosaibi and Brothers (AHAB), a local conglomerate that currently enjoys two-thirds of creditors support for its debt proposal.

AHAB and another company, Saad Group, defaulted in 2009 during Saudi Arabia’s biggest financial crisis, leaving international and regional banks and other creditors around $ 22 billion.

Editing by Andrew Torchia and Adrian Croft

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