Best Bankruptcy Lawyers in Al Falah

About Bankruptcy Law in Al Falah, Saudi Arabia

Bankruptcy in Al Falah is governed by national law that applies across the Kingdom of Saudi Arabia. The primary framework is the Saudi Bankruptcy Law, issued in 2018, together with its implementing regulations and rules issued by the Bankruptcy Commission. The law modernized insolvency practice in the Kingdom and aims to preserve enterprise value, balance the interests of creditors and debtors, encourage entrepreneurship, and provide transparent, court-supervised procedures for financial distress.

Al Falah is a district within Riyadh, so filings and hearings for entities based there are generally handled by the Riyadh Commercial Court and related Enforcement Courts, with regulatory oversight by the Bankruptcy Commission. Proceedings and announcements are managed through official platforms maintained by the Ministry of Justice and the Bankruptcy Commission. Arabic is the official language for filings and court documents.

The law provides multiple tools that can be tailored to the situation of the debtor. These include preventive settlement, financial reorganization, liquidation, administrative liquidation, and special simplified procedures for small debtors. The system allows for court-approved financing, a temporary stay of creditor actions, voting by creditor classes, and cross-border cooperation in appropriate cases.

Why You May Need a Lawyer

Bankruptcy and insolvency are complex. A lawyer helps assess options, manage deadlines, and protect your rights whether you are a debtor, a creditor, or a stakeholder. You may need legal support in any of the following common situations.

You are a business owner in Al Falah with cash flow pressure, overdue bank facilities, supplier arrears, or tax and Zakat liabilities, and you need to understand whether preventive settlement or financial reorganization can stabilize the business while you negotiate with creditors.

You are a creditor and received a court notice that a customer has filed for preventive settlement or reorganization. You need guidance on filing claims, participating in creditor committees, challenging transactions, and enforcing security.

You are considering liquidation of a company or branch in Riyadh and want to know how liquidation under the Bankruptcy Law interacts with the Companies Law, labor obligations, leases, and ongoing contracts.

You are a director or manager concerned about potential personal liability for mismanagement, preferential payments, or transfers at an undervalue made before filing. You need advice on duties in the vicinity of insolvency.

You are a secured lender with movable or real estate security and want to preserve or enforce your rights during a court-ordered moratorium, including seeking permission to enforce or to obtain adequate protection.

You are a guarantor or group company exposed to a borrower in distress and need to understand whether the stay extends to you and how to manage cross-guarantees, set-off, and related party claims.

You are a contractor or supplier facing nonpayment and need to know whether to continue performance, how to protect retention of title rights, and when to terminate or suspend contracts lawfully.

You are a foreign company with assets or creditors in Saudi Arabia and require guidance on recognition of foreign proceedings or starting local proceedings that coordinate with a restructuring abroad.

Local Laws Overview

Who is covered. The Bankruptcy Law applies to legal persons and to natural persons who are engaged in commercial, professional, or profit-seeking activity. Pure consumers who are not engaged in such activity are generally outside its scope and are instead subject to general enforcement procedures.

Available procedures. The law provides five main procedures. Preventive settlement is a debtor-in-possession process focused on early negotiation with a temporary stay and a plan approved by creditor vote and court confirmation. Financial reorganization allows deeper restructuring under a trustee who supervises operations, prepares claims schedules, and puts a plan to a vote. Liquidation is used when rescue is not viable and leads to an orderly sale of assets and distribution of proceeds. Administrative liquidation is used when assets are insufficient to cover the costs of ordinary liquidation and is administered with the involvement of the Bankruptcy Commission. Small debtor procedures provide simplified steps and shorter timelines for qualifying micro and small enterprises.

Filing tests and triggers. A debtor may file if it is insolvent or likely to become insolvent. Insolvent means unable to pay debts as they fall due or that liabilities exceed assets. Creditors may also petition in certain circumstances. The court can reject abusive or incomplete petitions, so preparation is critical.

Moratorium. Upon commencement, most procedures include a court-ordered stay that temporarily suspends enforcement actions, attachments, and new lawsuits against the debtor. The court can tailor the scope, and certain claims may still proceed with permission. Criminal matters are not typically halted by the stay.

Management and trustee. In preventive settlement the debtor usually remains in possession, subject to court supervision. In financial reorganization and liquidation, a licensed trustee or liquidator is appointed. Trustees are licensed and overseen by the Bankruptcy Commission.

Contracts, leases, and critical vendors. The law permits continuation of essential contracts and gives a mechanism to reject or terminate burdensome executory contracts with court approval, subject to compensation rules. Ipso facto clauses that trigger termination solely due to insolvency may be limited by the court to preserve value.

Financing during the case. Court-approved new money and provision of goods and services on credit during the procedure can receive priority status and protections to encourage rescue financing. Security can be granted on unencumbered assets, or on junior basis on encumbered assets, with court approval.

Priority and distributions. The law sets a ranking that generally prioritizes court costs and approved rescue financing, then secured claims to the extent of collateral value, with unsecured and subordinated claims following, and specific preferences for employee wages and certain family support obligations subject to statutory caps. Zakat and tax claims are addressed according to the law and may be treated differently depending on whether they are secured or unsecured. Exact ranking depends on the case and court orders.

Employees and labor issues. Wages and end-of-service benefits are addressed as part of the claims process. The court and trustee will consider continuity of employment in rescue procedures, and settlement agreements or liquidation plans must account for labor entitlements under Saudi Labor Law.

Avoidance actions. The trustee or debtor may challenge transactions made before filing that unfairly favor one creditor over others or that transfer assets for less than value. The look-back period, defenses, and burden of proof are defined by statute.

Group companies and guarantors. The court may coordinate related proceedings to improve efficiency. The moratorium generally applies to the debtor only, but the court can issue protective measures affecting affiliates in limited cases. Guarantors typically remain liable unless a plan or settlement expressly and lawfully compromises their liability and is approved.

Cross-border coordination. The law contains provisions for recognition and cooperation with foreign proceedings, allowing the Saudi court to assist a foreign main proceeding or to open a local proceeding for Saudi-based assets or creditors. The court will consider reciprocity, fairness, and public policy.

Transparency and notices. Key steps must be announced through the Bankruptcy Register and official channels. Creditors must lodge claims within court-set deadlines, and late filing can prejudice recovery.

Frequently Asked Questions

What is the difference between preventive settlement and financial reorganization

Preventive settlement is an early-stage, debtor-led process focused on negotiating a settlement with creditors while a temporary stay protects the business. The debtor stays in control, subject to supervision. Financial reorganization is more intensive, with a trustee supervising operations, a formal claims process, and a court-approved plan after voting by creditor classes. Both aim to preserve value and avoid liquidation.

Can I keep operating my business after filing

Yes, operations can continue in both preventive settlement and financial reorganization to preserve going-concern value. The court may set conditions, and a trustee may be appointed to supervise or manage. Ordinary course transactions usually continue, while extraordinary transactions require court or trustee approval.

How long does a bankruptcy procedure take in Saudi Arabia

Timeframes vary by procedure and case complexity. Preventive settlement can be relatively quick if creditors support the plan. Financial reorganization and liquidation can take longer due to claims verification, asset sales, and plan negotiations. Courts also set specific deadlines for voting, objections, and distributions.

What happens to lawsuits and enforcement actions once I file

Most civil lawsuits, enforcement actions, and attachments are stayed once the court opens the procedure. Creditors must file claims within the procedure instead of enforcing individually. The court can permit certain actions to proceed and can modify the scope of the stay for fairness.

Are secured creditors allowed to enforce their collateral during the case

Secured creditors have strong rights but are generally stayed from enforcing without court permission during the moratorium. The court may allow enforcement if the collateral is not necessary for reorganization or if adequate protection cannot be provided. Otherwise, secured claims are satisfied from collateral value through the plan or liquidation.

Do employees get paid during bankruptcy

Employee wages and end-of-service benefits are treated as claims in the procedure, with protections and priorities set by law. In rescue procedures, wages are typically paid in the ordinary course to maintain operations. In liquidation, outstanding wages are paid according to the statutory ranking and available proceeds.

Can directors or managers be personally liable

Directors and managers must act with care in the vicinity of insolvency. Liability can arise for fraudulent conduct, misappropriation, or unlawful preferences. The court can also impose measures such as travel restrictions and record-keeping requirements. Early legal advice helps mitigate risk.

Do bankruptcy proceedings affect guarantors and related companies

The moratorium and discharge apply to the debtor entity. Guarantors and affiliates typically remain liable unless they are included in coordinated proceedings or unless a plan expressly and lawfully compromises their obligations with the necessary approvals. Creditors can usually pursue guarantors outside the debtor's stay.

Can a foreign company file or participate in Saudi proceedings

Yes. Foreign companies with assets or operations in Saudi Arabia can access the procedures, and foreign creditors can file claims. The law also allows for recognition of foreign proceedings and cooperation by the Saudi court, subject to legal requirements and public policy.

Are bounced checks and criminal matters stopped by filing

The moratorium covers most civil enforcement, but criminal proceedings are treated differently and may continue. You should obtain case-specific advice if checks or other instruments could lead to criminal exposure, because treatment depends on the nature of the claim and the court's orders.

Additional Resources

Bankruptcy Commission. The national authority that licenses trustees, maintains the Bankruptcy Register, issues guidelines and forms, and oversees aspects of administrative liquidation.

Ministry of Justice and the Commercial Courts. The Riyadh Commercial Court handles most bankruptcy cases for Al Falah based entities, with electronic services available through the judiciary systems.

Enforcement Courts. Responsible for enforcing judgments and instruments, including interaction with moratorium orders during insolvency procedures.

Ministry of Commerce. Provides guidance on corporate compliance and the Companies Law, which intersects with liquidation and restructuring actions.

Zakat, Tax and Customs Authority. Manages Zakat and tax obligations that may form part of the claims process in bankruptcy and liquidation.

Riyadh Chamber of Commerce. Offers business support and may provide information on dispute resolution and access to professional services.

Saudi Bar Association and licensed law firms. Useful for locating practitioners with insolvency and restructuring credentials.

SOCPA - Saudi Organization for Chartered and Professional Accountants. A resource for finding insolvency-experienced accountants and financial advisors who work with trustees and courts.

Monsha'at - General Authority for Small and Medium Enterprises. Offers programs that can assist distressed SMEs with advisory and restructuring support.

Next Steps

Assess your situation early. Prepare a 13-week cash flow forecast, list of creditors and claims, contracts, leases, employee roster, security documents, and pending lawsuits. Early action increases options.

Consult a Saudi insolvency lawyer. Choose counsel with local court experience in Riyadh and familiarity with the Bankruptcy Commission's processes. Ask about preventive settlement, financial reorganization, and liquidation, and which path suits your goals.

Stabilize the business. With legal guidance, consider requesting protective measures and a moratorium, communicating with key creditors, and maintaining essential operations. Avoid unusual payments, related party transfers, or new obligations without advice.

Engage a financial advisor. Work with an advisor to prepare business plans, valuations, and a sustainable restructuring proposal. Accurate data helps with court filings and creditor negotiations.

Prepare for filing. Gather corporate documents, audited accounts, management accounts, tax and Zakat filings, major contracts, and security registrations. Ensure Arabic translations where required.

Coordinate with stakeholders. Approach banks, major suppliers, landlords, and employees with a consistent message that aligns with the intended procedure. Early creditor support can be decisive in plan approval.

Understand court expectations. Meet filing deadlines, respond to trustee requests, and comply with reporting obligations. Keep decision logs to demonstrate prudent management.

Plan the exit. Whether through plan confirmation or orderly liquidation, prepare for post-procedure governance, compliance, and any conditions the court sets. Monitor claims reconciliations and distributions until the case closes.

This guide provides general information for readers in Al Falah and greater Riyadh. It is not legal advice. For a strategy tailored to your facts, consult a qualified Saudi insolvency lawyer.