KSA’s bankruptcy law to protect SMEs

The draft law will boost the private sector’s contribution to the development of trade and industry.

According to Reuters, The new bankruptcy draft law will boost the private sector’s contribution to the development of trade and industry, increase transparency in the work environment and prevent manipulation and evasion of financial obligations, according to experts.

In its final stage, the proposed law will support small- and medium-size business, which face big challenges that often make them leave the market in their first years of activities.

“The recommended blueprint of the draft law aims to realize a number of goals, one of which is to enable debtors to meet their obligations, and this will be an added value to the national economy,” said Adel Alshokoor, board chairman of an event organizing company.

“It (the law) can do that as it lays the basis for the prevention of manipulation and, at the same time, will put in place a mechanism that does not allow businesses to restart their activities soon after liquidation, which will protect the rights of creditors,” he added.

Alshokoor said the main problem is not with the loans but the rules, regulations and mechanisms on the ground, and pointed to the achievements made in regaining the rights of litigants.

He said this step is very important because it re-establishes the rights of owners, and stressed that priority should be to restore trust in an objective work environment and provide incentives for the private sector to increase its productivity, in line with the 2030 Saudi Vision.

Economist Ghazi Abar expects the new law to be a major step forward for economic activities, as it has been drawn benefiting from international experience.

He said it is important to support business pioneers and ease regulations related to small- and medium-size businesses, arguing that the problem of financing will persist for a long time and affect this sector.

He called on banks to change their mechanisms and redirect a part of the loans to these projects, which are a main pillar of the economy.

“The principal goal of this law is to help the debtors repay their obligations to the creditors, and this will be helped through the role of small- and medium-size businesses, which face great challenges that often force them out of the market in the first few years of their activities; this is due to the finance and marketing of these projects and the difficulties in modernising tracts of these projects if they face difficulties at the beginning.”