Bankruptcy & Insolvency Lawyers
We act for debtors and creditors in bankruptcy and financial reorganisation proceedings.
Overview
The Saudi Bankruptcy Law changed the arithmetic of distress: liquidation is no longer the only route. Protective settlement and financial restructuring allow a business to continue while its debts are rescheduled under statutory protection. But those routes have to be sought early; a company that waits until cash runs out finds liquidation the only realistic option.
We act for distressed debtors and for creditors — in separate matters — covering assessment of the options before filing, preparing the opening application and its documents, preparing the settlement proposal and negotiating with creditors, and registering and challenging creditor claims.
We always advise early assessment: if the distress is temporary and driven by cash timing, direct negotiation may be enough. If it is structural, delay increases the debt and narrows the options, turning a file that could have been restructured into a liquidation.
The legal framework
Distress and insolvency are governed by one law with several procedures:
- The Bankruptcy Law, its regulations and its distinct procedures
- Protective settlement, financial restructuring and liquidation
- The Bankruptcy Committee and licensed bankruptcy trustees
- Creditor ranking and the treatment of secured debt
- The effect of opening a procedure on pending claims and enforcement
- Directors' liability in situations of distress
Situations we handle
Temporary liquidity distress
Rescheduling with the main creditors may be sufficient without a formal procedure. We assess that first to avoid unnecessary cost.
Structural distress with many creditors
Protective settlement allows a binding collective arrangement instead of endless bilateral negotiation.
A creditor protecting its position
Registering the claim early and following the procedure matter more to recovery than the size of the debt.
Orderly liquidation of a dormant entity
Statutory liquidation protects directors from later liability and closes obligations cleanly.
Effect on pending litigation
Opening a procedure affects claims and enforcement. A creditor who does not follow it can lose priority without noticing.
Costly mistakes we see
- 1
Filing too late
Waiting until cash is exhausted removes restructuring as a practical option and leaves only liquidation.
- 2
Preferring one creditor before filing
Certain transactions in the period before opening can be challenged and may expose directors to liability.
- 3
Not registering the claim in time
A creditor who fails to register within the deadlines can lose the right to participate in distributions entirely.
- 4
Mixing company and personal funds
This is what threatens limited liability protection precisely at the point of distress — the worst moment to discover it.
How the procedure runs, step by step
The Saudi Bankruptcy Law provides restructuring routes before liquidation, and the difference between saving a business and winding it up is usually the timing of the filing, not the size of the debt.
- 1
Diagnose the financial and legal position
We examine cash flow, liabilities and the extent of payment default to choose the route: protective settlement, financial restructuring, or liquidation. Delay closes the rescue routes and leaves liquidation alone.
- 2
Select the procedure and file
The application goes to the Commercial Court with a statement of assets and liabilities and the list of creditors. An incomplete application is rejected and wastes the very time the protective route depends on.
- 3
Stay of claims and protection of assets
Acceptance of the application stays claims and enforcement against the entity, which creates room to negotiate. That effect alone is what stops a company disintegrating under scattered attachments.
- 4
Negotiate the restructuring proposal
The proposal sets out the payment schedule and any write-downs, and creditors vote on it at the statutory majorities. A realistic proposal succeeds where a cautious one fails: creditors accept a reasonable haircut and reject a schedule nobody believes.
- 5
Ratification and implementation, or liquidation
The court ratifies the proposal and it becomes binding; if the vote fails, the file moves to liquidation under the statutory order of creditor priority. We monitor implementation, because breaching a ratified proposal returns the file to liquidation.
Documents we will ask you for
- Financial statements and a recent trial balance
- A list of creditors, amounts and maturity dates
- A schedule of assets and the security over them
- Financing contracts and guarantees given
- Pending claims and enforcement proceedings
- A proposed operating plan for continuing to trade
Fees and timelines
Distress files are priced by stage: options assessment, preparing the application and its documents, then managing the procedure and negotiating with creditors. Trustee fees and official charges are paid to the relevant bodies and estimated for you in advance.
On timing: assessment and preparing the application take two to six weeks depending on the scale of liabilities and the quality of records. The procedure itself runs for months and can exceed a year in multi-creditor files.
Common questions
When should we apply for protective settlement?
When signs of distress appear and before cash is exhausted, while the company can still put a serious proposal to creditors. Delay is what converts a viable restructuring into a liquidation.
Does the procedure stop claims against the company?
Opening a procedure has effects on pending claims and enforcement depending on its type and the statutory rules. That is one of the main reasons for using it: it gives the company room to reorganise.
How are creditors ranked?
The law sets an order of debts and particular treatment for secured creditors. Registered security gives a materially better position than an ordinary claim, and the difference shows at distribution.
Do the owners lose control of the company?
It depends on the procedure and the degree of trustee supervision. In restructuring, management may continue under supervision; in liquidation, control passes to the trustee entirely.
What should a creditor do?
Register the claim within the deadlines with complete documents and follow the meetings and proposals. The creditor absent from the process is usually the one that recovers least.
Are directors personally liable?
Liability can arise in defined situations, such as continuing to contract with knowledge of distress, or transactions prejudicing creditors before the procedure opens. Timing and documentation are what protect directors.
Can the business keep trading?
In settlement and restructuring, yes — that is their purpose: continuing operations while obligations are rescheduled. Liquidation, by contrast, ends the business and distributes the assets.
How long does the procedure take?
Usually months, and it can exceed a year in large or multi-creditor files. The quality of accounting records and responsiveness to the trustee affect duration more than anything else.
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