bankruptcy filings

If your company is facing circumstances that make it unable to meet its financial obligations to creditors, you may need to consult with a lawyer specializing in bankruptcy filings. The lawyer will take the appropriate steps, including liquidating bank accounts and assets, and developing a plan to pay off debts. So, what exactly is the role of the lawyer in this field, and how can we provide you with this service in the best possible way?

What is Bankruptcy in Commercial Law?

Bankruptcy refers to the inability of the business owner to pay off their debts, necessitating the liquidation of assets and the distribution of funds to creditors based on the country's commercial system. In this case, the bankruptcy petition is filed through a lawyer specializing in bankruptcy cases in Saudi Arabia, who is well-versed in the laws and regulations, ensuring your rights are legally protected.

The bankruptcy system in the Kingdom applies to local companies, foreign investors, entrepreneurs, professionals, and traders.

At Sahl Law Firm, we offer bankruptcy filing services and handle them professionally, achieving the goals and requirements of our clients and ensuring the protection of both debtor and creditor rights.

Important Terms and Concepts Related to Bankruptcy Filings

Before you dive into the details of bankruptcy filing services, it’s useful to clarify some related terms, as outlined in the first article of the general provisions of this system:

System: Bankruptcy System
Court: Commercial Court
Debtor: A person who owes a debt.
Creditor: A person who is owed a debt by the debtor.
Debt: The financial obligation owed by the debtor.
Defaulter: A debtor who has failed to meet a debt on the due date.
Bankrupt: A debtor whose debts have consumed all their assets.
Regulated Entity: A person licensed to engage in financial activity or managing a public facility.
Bankruptcy Trustee: A person appointed by the court or the petitioner to carry out the duties assigned based on the type of procedure (including financial reorganization trustee and liquidation trustee).
Assets: Movable and immovable property, intellectual property rights, financial claims against others (whether due or overdue), and other rights of value.
Bankruptcy Record: A register created and maintained by the Bankruptcy Committee according to the system's rules.
Proposal: A proposal for preventive settlement or financial reorganization, which must be voted on.

Types of Bankruptcy

The bankruptcy system is divided into three types:

Genuine Bankruptcy: A person enters business with reasonable capital and organized accounts but suffers losses beyond their control, such as damage from flooding or fire.
Negligent Bankruptcy: A person enters business with organized accounts but is reckless in their spending and conceals their insolvency from creditors, leading to depletion of their capital.
Fraudulent Bankruptcy: A person engages in business using deceptive methods, causing harm to others' rights, regardless of their level of spending or account organization.

According to commercial law, bankruptcy is only declared for those who meet the following conditions: being a trader, defaulting on their financial obligations, and having a court ruling declaring bankruptcy.

Why Do Some Companies Have to Declare Bankruptcy?

Experts point out several reasons companies might declare bankruptcy, including:

Issues with the business model.
Failure in research and planning.
Poor management.
Legal and economic problems.
Financial mismanagement.
Failure to make appropriate decisions.

Objectives of the Bankruptcy System in Saudi Commercial Law

The primary objectives of the bankruptcy system in Saudi Arabia include:

Balancing the rights of creditors with the interests of investors.
Enabling the bankrupt company to restore its operations.
Attracting investors.
Preserving confidence in companies even after bankruptcy, preventing total collapse.
Contributing to protecting the country's economy.

How Does the Bankruptcy System Protect Companies?

Filing for bankruptcy offers several benefits for companies, including:

Terminating legal actions taken by creditors.
Protecting the company from further actions against it.
Preventing creditors from seizing its goods.

However, bankruptcy should be considered a last resort. A specialized lawyer must assess all other possible solutions to save the company’s financial situation.

Our Services Related to Bankruptcy Filings

We provide the following services related to bankruptcy filings in Saudi Arabia:

Legal consultations on bankruptcy filings.
Filing and registering bankruptcy cases with the commercial courts.
Debt collection from defaulting or bankrupt debtors.
Implementing and monitoring liquidation procedures.
Representing clients before the relevant courts.

Bankruptcy Procedures Under Saudi Law

The bankruptcy system includes several procedures to protect the rights of both debtors and creditors, the most important of which are:

Preventive Settlement: Aims to facilitate an agreement between the debtor and creditors to settle debts while the debtor retains control of their business operations.
Financial Reorganization: Facilitates an agreement between the debtor and creditors to reorganize the business under the supervision of a financial reorganization trustee.
Liquidation: Involves selling the debtor's assets and distributing the proceeds fairly among creditors under the supervision of a trustee.

Additional procedures include administrative liquidation, small debt settlements, financial reorganization for small debtors, and liquidation for small debtors. Each procedure involves the following stages: preparation, filing, initiation, execution, and completion.

Bankruptcy Does Not Mean the End

Bankruptcy does not mean you will never work again, nor does it mean your business must close permanently. There are various steps and procedures to alleviate the pressures of bankruptcy and protect your business and assets.

Now, you can receive the appropriate legal advice and a range of services related to bankruptcy filings from Sahl Law Firm, one of the top law firms in Saudi Arabia.

How to File for Bankruptcy in Saudi Law Firms

If your company is unable to meet its obligations, it may opt to declare bankruptcy through the relevant court by following these steps:

Submit the bankruptcy petition to the court.
The court examines the petition and its grounds.
Creditors are notified of the bankruptcy.
A petition to terminate the bankruptcy procedure is submitted to the commercial court, along with supporting documents.
Creditors may object to the bankruptcy petition within two weeks.
Creditors are informed of the company’s reactivation post-liquidation.
The debtor submits periodic reports detailing the distribution of funds to creditors.

If your company is in financial distress and you wish to file for bankruptcy in a legally sound manner, don’t hesitate to contact Sahl Law Firm for appropriate legal counsel and guidance, ensuring the protection of your rights and those of your creditors, in accordance with the Saudi bankruptcy law.

Why Is It Important to Appoint a Specialized Bankruptcy Lawyer in Saudi Arabia?

If you wish to file for bankruptcy for your company, it is essential to appoint a reputable lawyer with extensive experience in this field for the following reasons:

They provide appropriate legal advice on many aspects of bankruptcy.
They ensure that you follow the correct procedures to meet your goals and fulfill your requirements.
They help mitigate risks and avoid potential legal issues for your company in the future.

A specialized bankruptcy lawyer in Saudi Arabia is your safeguard, bringing experience in dealing with such cases and guiding you through the necessary steps to overcome obstacles and resolve your issues with the best legal solutions.