Debt Collection in Saudi Arabia

The debt collection procedure in Saudi Arabia begins with an assessment of the debtor’s solvency, scope of activity, business history, documentary evidence of the debt, current court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy to be employed on behalf of the client in the collection process.

If the debtor has no ongoing court cases or outstanding judgments for debt collection and is actively engaged in commercial activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messengers. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers to achieve the fastest possible debt recovery.

The average time for informal out-of-court collection is up to 60 days (except in cases where a debt repayment installment plan has been agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the limitation period. The limitation period for debt collection is 10 years. The law prohibits shortening or extending this period by agreement of the parties. The consequences of the expiration of the limitation period are applied by the court only upon the defendant’s application. The limitation period is interrupted if the debtor recognizes the creditor’s right explicitly or implicitly. After the interruption, the limitation period is calculated anew.

Saudi Arabian legislation provides for judicial debt collection in ordinary legal proceedings.

An ordinary court proceeding begins with the filing of a claim by entry in the court registry. The case cannot be transferred to the court for consideration until the filing of the claim, the setting of a hearing date, and the completion of the notification process have been completed. The court clerk will indicate the date and time of the hearing on the claim, and this information will be reflected in the notification process.

The notice is given to the bailiff for subsequent service on the defendant. The bailiff must serve the claim and notice on the defendant within 15 days. The time for appearance in court is not less than 8 days from the date of service of notice, and in commercial cases not less than 4 days. The defendant must file a memorandum of defense with the court no later than three days before the hearing, and no later than one day before the hearing in a commercial case.

In the event that the defendant fails to provide a defense or fails to appear at the hearing, the plaintiff may ask the court to rule on the merits if the case is ready for decision. A case is considered ready for judgment after the parties’ positions and final claims have been clarified.

When a commercial claim is filed, the court shall schedule a hearing for its consideration within a period not exceeding 20 days from the date of filing the claim. In commercial cases, the court shall also hold a preparatory hearing to verify issues related to jurisdiction and the conditions for satisfying the claim; propose reconciliation to the parties; draw up a list of motions and defenses, determine the subject of the dispute and the complexity of the case. After verifying the preliminary issues at the first hearing, the court may adjourn the hearing, if necessary, for a period not exceeding 60 days. The court may grant the parties the opportunity to exchange briefs and documents under the supervision of the court for a period not exceeding 60 days, indicating the number of briefs, the date of filing each of them, and the date of the next hearing.

The number of hearings in a commercial case shall not exceed three after notice to the defendant. Further postponement may be allowed only in exceptional cases, such as illness of a party to the case or his representative, or failure of a witness to appear.

During court hearings, both in ordinary and commercial cases, the court hears the case, the statements and defenses of the parties, evaluates the evidence, and the testimony of witnesses. After the parties have presented their statements and closing arguments at the hearing, the court concludes the proceedings and makes a decision.

The decision of the court of first instance may be appealed to the appellate court within 30 days from the date of issuance of the decision or from the date of service of the decision. The decision of the appellate court may be appealed to the Supreme Court of Saudi Arabia. The period for filing a cassation appeal is 30 days. Filing an appeal to the Supreme Court does not suspend the execution of the contested decision. However, the court may temporarily suspend the execution of the decision if this is requested in the objection and there is a fear that execution may cause irreparable damage. Decisions of the Supreme Court are not subject to further appeal.

After the judgment comes into legal force, the creditor should initiate the procedure for enforcement. The judgment may be presented for enforcement within 10 years. As part of the enforcement of the judgment, the creditor’s claims can be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor with their subsequent sale; seizure and confiscation of securities; seizure and confiscation of company shares.

An additional option for debt collection from companies and businessmen is bankruptcy proceedings. According to the Saudi Arabian Bankruptcy Law, a creditor has the right to initiate liquidation proceedings against a debtor if the debtor is in a state of financial difficulty or bankruptcy (when debts exceed assets) and has not met the requirement to pay the debt within 28 days. Also, to file an application for liquidation, the amount of the debt must be no less than the amount determined by the creditors’ committee in each individual case. At this stage, if the debtor’s assets are insufficient to fully satisfy the creditors’ claims, it is possible to cancel the debtor’s transactions made with the intent to harm the creditors. Such transactions made before the start of any bankruptcy proceedings include: unlawful use or appropriation of the debtor’s assets or property included in the bankruptcy estate; conducting the debtor’s affairs with the purpose of defrauding creditors; concluding transactions without remuneration or on unfair terms; payment of debts to one of the creditors to the detriment of the rights of other creditors; provision of security for an unspecified debt. As a result of the cancellation of the above transactions or actions, it is possible to return back to the debtor what he lost from such transactions and thereby increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure.

If you have any questions or need support for international debt collection in Saudi Arabia, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY SAUDI ARABIA

01.11.2024

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