The most important conditions for declaring bankruptcy of companies in Saudi Arabia The following are a set of conditions that must be met for a company’s bankruptcy declaration request to be accepted in the Kingdom of Saudi Arabia: 1. The presence of a natural or legal person in his capacity as a merchant whose job is to engage in commercial activities. 2. The merchant or his company’s inability to pay the debts that he used to pay before that. 3. The company owner must submit a bankruptcy declaration request to the competent court, where his request is reviewed and verified to be credible, and then a judicial ruling is issued declaring his bankruptcy. When the previous conditions are met, the company owner preserves his company, his reputation, and the rights of creditors, including employees and workers in his company, as the law regulates the process to limit disputes that may arise between partners or creditors. Legal procedures required to be implemented in the event of a company’s bankruptcy in Saudi Arabia There are several legal procedures that must be implemented in the event of bankruptcy of a company in Saudi Arabia with the aim of helping companies and protecting them from collapses resulting from bankruptcy. These procedures are as follows: 1. Preventive settlement between the bankrupt and creditors and agreement to settle debts while retaining management of the company’s activity. 2. Liquidation of the bankrupt’s assets and properties under the supervision of a liquidation trustee to give creditors their rights. 3. Agreement between the bankrupt and the creditors to reorganize the company financially under the supervision of a financial regulatory trustee. 4. Preventive settlement for small debtors while retaining the management of the company’s activity by the debtors. 5. Financial reorganization for small debtors under the supervision of the financial regulatory trustee. 6. Selling the debtor’s assets and distributing the amount to the creditors under the supervision of the liquidation trustee. You can contact a bankruptcy lawyer in Riyadh to inquire about one of these procedures and the conditions, steps and benefits of each procedure, as the lawyer provides you with the necessary legal advice to help you make the most appropriate decision for your case. Employee rights in the event of company bankruptcy The labor regulations in the Kingdom of Saudi Arabia are keen to regulate the relationship between both the employer and the employees in order to guarantee their rights and clarify their duties, including: Clarifying the employee’s rights in the event of the company’s bankruptcy in Article 19, which stipulates the following items: 1. All dues of the employee or his heirs according to the system are considered debts on the company in the first place. 2. The employee and his heirs have a privilege on all the assets of the company owner or employers until he receives his dues. 3. All dues of the employee and his heirs must be recorded as privileged debts in the event of the company’s bankruptcy or liquidation. 4. An advance payment must be made to the employee in the amount of one wage from his previously determined salary, before paying any other expenses such as legal costs or bankruptcy or liquidation costs. Private sector workers also have the right, when liquidating the company, to be given advance notice of no less than 60 days before the liquidation, and to receive their full salaries until the date of termination of the employment contract, as well as to receive end-of-service compensation and all other financial dues such as allowances, vacation balance and overtime until the date of the company’s bankruptcy, in accordance with the provisions of the Saudi Labor Law. If the company that declared bankruptcy is participating in the Social Insurance System, employees and workers in this case can benefit from this unemployment system. If the employee dies at the same time as the company goes bankrupt, the employer must compensate his heirs and pay all financial dues that the heirs must receive, and they can resort to the judiciary if the employer objects to that. There are some cases in which an employee or worker is deprived of his rights, including: being dismissed due to misconduct or negligence at work, or due to causing losses or damages to the employer, or the worker terminating the employment contract or submitting his resignation or breaching one of the terms of the employment contract without an excuse. Legal procedures followed when the employer refuses to pay the employee’s rights in the event of the company’s bankruptcy The Saudi Labor Law has allowed the employee to take the necessary legal measures in order to protect his rights and claim them when the employer refuses to pay them. The most important of these procedures are: 1. Filing a complaint with the General Labor Authority with the provision of evidence proving his right. 2. Filing a lawsuit to claim his right, and an experienced lawyer in this field can be hired to take the necessary legal measures. 3. Participating in liquidation procedures in order to preserve the rights of employees and workers in the company. If the employer is unable to pay the employees’ dues due to the lack of financial liquidity, some of the employer’s assets will be liquidated and sold at public auction, and then the amounts due will be collected from them. The employee can also claim compensation from the employer for losing his job, where this request is considered and the amount of compensation is determined based on the monthly salary and length of service, and the employer must commit to paying the compensation. In the end, in the event that the decision is made to bankrupt or liquidate the company, you, as an employee or worker in the company, must know your rights clearly and claim them, by communicating with the employer and the relevant official institutions such as the Saudi Ministry of Labor. You can also obtain specific legal advice from a certified lawyer with extensive experience in Saudi labor laws to provide you with appropriate legal support and guide you to the best course of action in such situations and the procedures that you must take.