Signs of Economic Recession / Is It Time To Apply The Law Of Preventative Settlement from bankruptcy?
Given the unstable economic situation inside and outside the Kingdom and the emergence of insolvency with certain companies in general and contracting ones in particular in terms of their capacity to satisfy their obligations on time, we, the lawyers, have to seek effective solutions for our clients to maintain their enterprises and protect them from the specter of bankruptcy or liquidation and the relevant consequences including the dismissal of many employees and the unemployment of many workers. We have to find the same away from the monotonous usual solutions such as salary cuts and official or arbitrary dismissal of employees for the reduction of expenses so that companies can maintain the fulfillment of their debts and obligations.
Thus, the application of the law of preventive settlement from bankruptcy established by Royal Decree No. meem/16 dated 04/09/1416 A.H. appears to be a solution that may assist investors and businessmen to maintain the stability of their businesses.
Looking into the text of this law, we find that the First Article thereof states that: “Every, merchant, individual or corporate, whose financial conditions have worsened to a degree presaging the failure to pay debts, may petition for amicable settlement with creditors to the committees to be formed for this purpose with the Chambers of Commerce and Industry, in accordance with the rules and procedures prescribed in the Executive Regulations”.
Those judicial receivers to be appointed by the Court may be chartered accountants, lawyers or legal counselors and experts in the relevant laws.
Additionally, the Saudi Arabian Monetary Agency (SAMA) has issued several controls and conditions for the opening of banking settlement accounts including, but not limited to the following:
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