Royal Decree No. M/94 dated 15/04/1441 AH
By the grace of Allah Almighty
We, Salman bin Abdulaziz Al Saud
King of the Kingdom of Saudi Arabia
Based onArticle (Seventy) of the Basic Law of Governanceissued by Royal Order No. (A/90) dated 27/8/1412 AH.
And based onArticle (Twenty) of the Council of Ministers Lawissued by Royal Order No. (A/13) dated 3/3/1414 AH.
And based onArticle (Eighteen) of the Shura Council Lawissued by Royal Order No. (A/91) dated 27/8/1412 AH.
After reviewing Shura Council Decision No. (137/31) dated 13/8/1441 AH.
After reviewing Council of Ministers Decision No. (512) dated 14/8/1441 AH.
We decree the following:
First: Approval of the Movable Property Security Law, in the attached form.
Second: Approval of the amendment of theLaw of Commercial Lienissued by Royal Decree No. (M/86) dated 8/8/1439 AH, amended by Royal Decree No. (M/19) dated 9/2/1441 AH, as follows:
1- Amendment of Article (One) as follows:
A- Deletion of the following definitions: (Ministry, Execution Agent, Floating Lien, Fungible Property, Valuable Property, Register, Extract of Enforcement Document, Extract of Direct Execution, Economic Debt, Income of the Mortgaged Property, Commercial Bills).
B- Amendment of the definition of Minister to read as follows: "Minister of Commerce".
2- Deletion of the phrase "economic with respect to the debtor" from Article (Two).
3- Amendment of Article (Four) to read as follows: "The lien contract shall be effective against third parties by publication or by the transfer of possession of the mortgaged property to the mortgagee or the notary, in accordance with the provisions of the Movable Property Security Law."
4- Deletion of paragraphs (2), (3), and (4) of Article (Five).
5- Substitution of the phrase "provided that it is likely to exist" in place of the following: "provided that the existence of the future property is expected by the mortgagor and mortgagee and that the mortgagor owns it before the maturity of the secured debt" in Article (Nine).
6- Deletion of paragraph (1) of Article (Ten).
7- Deletion of Articles (Eleven), (Thirteen), (Sixteen), (Seventeen), (Eighteen), (Twenty-Three), (Twenty-Seven), (Twenty-Eight), (Twenty-Nine), (Thirty), (Thirty-One), (Thirty-Two), (Thirty-Five), (Thirty-Seven), (Forty-Two), and (Forty-Four).
8- Deletion of the following: "The remainder of the income shall revert to the mortgagor, unless it is agreed in the lien contract to mortgage the income. In this case, the remainder shall be deposited in a special account in accordance with the provisions of Article (Thirty-Six) of the Law. It is permissible to collect part of the secured debt from the income by agreement between the mortgagor and the mortgagee" from paragraph (2) of Article (Fourteen).
9- Deletion of the phrase "in accordance with the provisions of Article (Sixteen) of the Law" from paragraph (1) of Article (Twenty-Four), as well as the phrases "and the mortgagor deposits the compensation amount in a special account subject to the provisions of Article (Thirty-Six) of the Law" and "-in writing- to deduct the compensation amount from the principal of the secured debt" from paragraph (2) of the same article.
10- Deletion of paragraph (4) of Article (Twenty-Five).
11- Amendment of Article (Twenty-Six) to read as follows: "Subject to the provisions of execution contained in the Movable Property Security Law, the regulations specifying special provisions for execution on the mortgaged property."
12- Deletion of the phrase "and this shall be recorded in its commercial register" from the beginning of Article (Thirty-Three).
13- Deletion of paragraphs (1) and (4) of Article (Thirty-Six).
14- Deletion of paragraph (2) of Article (Thirty-Nine).
15- Deletion of subparagraphs (E), (F), and (G) of paragraph (1) of Article (Forty).
16- Deletion of paragraph (2) of Article (Forty-Five).
Third:
1- Notwithstanding the provision of item (Second) of this decree, the validity of security rights registered in the Unified Commercial Liens Register shall continue from the date and time of their registration in that register, and they shall remain subject to the applicable provisions at the time of registration until their expiration, provided that - with regard to priority, amendment of registration, and search for rights in the register - they shall be subject to the provisions of the Movable Property Security Law. These rights shall be published in the Unified Register of Rights on Movable Property within six (6) months from the effective date of the Movable Property Security Law.
2- The secured party - without requiring the guarantor's consent - may publish rights arising from any transaction falling within the scope of the Movable Property Security Law - except for transactions registered in the Unified Commercial Liens Register - if those rights arose before the operation of the Unified Register of Rights on Movable Property, within six (6) months from the effective date of the Movable Property Security Law.
3- The priority of rights published pursuant to paragraph (2) of this item shall be determined from the date of their effectiveness against third parties according to the legal provisions under which they arose; otherwise, they shall be effective against third parties from the date of their publication in the Unified Register of Rights on Movable Property.
Fourth: His Highness the Deputy Prime Minister, the Ministers, and the heads of the relevant independent bodies - each in his respective domain - shall implement this decree.
Salman bin Abdulaziz Al Saud
In the name of Allah, the Most Gracious, the Most Merciful
Council of Ministers Decision No. (512) dated 14/8/1441 AH
The Council of Ministers
After reviewing the correspondence received from the Royal Court No. 47997 dated 13/8/1441 AH, including the letter of His Excellency the Minister of Finance, Chairman of the Financial Sector Development Program Committee No. 3638 dated 5/4/1441 AH, regarding the draft Movable Property Security Law and the amendment of the Law of Commercial Lien.
After reviewing the aforementioned draft law.
After reviewing the Law of Commercial Lien, issued by Royal Decree No. (M/86) dated 8/8/1439 AH, amended by Royal Decree No. (M/19) dated 9/2/1441 AH.
After reviewing Royal Order No. (40424) dated 11/8/1439 AH.
After reviewing the minutes No. (940) dated 14/7/1441 AH, and memorandum No. (613) dated 13/8/1441 AH, prepared by the Bureau of Experts at the Council of Ministers.
And after reviewing the recommendation prepared by the Council of Economic and Development Affairs No. (11-23/41/D) dated 15/7/1441 AH.
After considering Shura Council Decision No. (137/31) dated 13/8/1441 AH.
After reviewing the recommendation of the General Committee of the Council of Ministers No. (5845) dated 13/8/1441 AH.
It is decided as follows:
First: Approval of the Movable Property Security Law, in the attached form.
Second: Approval of the amendment of theLaw of Commercial Lienissued by Royal Decree No. (M/86) dated 8/8/1439 AH, amended by Royal Decree No. (M/19) dated 9/2/1441 AH, as follows:
1- Amendment of Article (One) as follows:
A- Deletion of the following definitions: (Ministry, Execution Agent, Floating Lien, Fungible Property, Valuable Property, Register, Extract of Enforcement Document, Extract of Direct Execution, Economic Debt, Income of the Mortgaged Property, Commercial Bills).
B- Amendment of the definition of Minister to read as follows: "Minister of Commerce".
2- Deletion of the phrase "economic with respect to the debtor" from Article (Two).
3- Amendment of Article (Four) to read as follows: "The lien contract shall be effective against third parties by publication or by the transfer of possession of the mortgaged property to the mortgagee or the notary, in accordance with the provisions of the Movable Property Security Law."
4- Deletion of paragraphs (2), (3), and (4) of Article (Five).
5- Substitution of the phrase "provided that it is likely to exist" in place of the following: "provided that the existence of the future property is expected by the mortgagor and mortgagee and that the mortgagor owns it before the maturity of the secured debt" in Article (Nine).
6- Deletion of paragraph (1) of Article (Ten).
7- Deletion of Articles (Eleven), (Thirteen), (Sixteen), (Seventeen), (Eighteen), (Twenty-Three), (Twenty-Seven), (Twenty-Eight), (Twenty-Nine), (Thirty), (Thirty-One), (Thirty-Two), (Thirty-Five), (Thirty-Seven), (Forty-Two), and (Forty-Four).
8- Deletion of the following: "The remainder of the income shall revert to the mortgagor, unless it is agreed in the lien contract to mortgage the income. In this case, the remainder shall be deposited in a special account in accordance with the provisions of Article (Thirty-Six) of the Law. It is permissible to collect part of the secured debt from the income by agreement between the mortgagor and the mortgagee" from paragraph (2) of Article (Fourteen).
9- Deletion of the phrase "in accordance with the provisions of Article (Sixteen) of the Law" from paragraph (1) of Article (Twenty-Four), as well as the phrases "and the mortgagor deposits the compensation amount in a special account subject to the provisions of Article (Thirty-Six) of the Law" and "-in writing- to deduct the compensation amount from the principal of the secured debt" from paragraph (2) of the same article.
10- Deletion of paragraph (4) of Article (Twenty-Five).
11- Amendment of Article (Twenty-Six) to read as follows: "Subject to the provisions of execution contained in the Movable Property Security Law, the regulations specifying special provisions for execution on the mortgaged property."
12- Deletion of the phrase "and this shall be recorded in its commercial register" from the beginning of Article (Thirty-Three).
13- Deletion of paragraphs (1) and (4) of Article (Thirty-Six).
14- Deletion of paragraph (2) of Article (Thirty-Nine).
15- Deletion of subparagraphs (E), (F), and (G) of paragraph (1) of Article (Forty).
16- Deletion of paragraph (2) of Article (Forty-Five).
Third:
1- Notwithstanding the provision of item (Second) of this decision, the validity of security rights registered in the Unified Commercial Liens Register shall continue from the date and time of their registration in that register, and they shall remain subject to the applicable provisions at the time of registration until their expiration, provided that - with regard to priority, amendment of registration, and search for rights in the register - they shall be subject to the provisions of the Movable Property Security Law. These rights shall be published in the Unified Register of Rights on Movable Property within six (6) months from the effective date of the Movable Property Security Law.
2- The secured party - without requiring the guarantor's consent - may publish rights arising from any transaction falling within the scope of the Movable Property Security Law - except for transactions registered in the Unified Commercial Liens Register - if those rights arose before the operation of the Unified Register of Rights on Movable Property, within six (6) months from the effective date of the Movable Property Security Law.
3- The priority of rights published pursuant to paragraph (2) of this item shall be determined from the date of their effectiveness against third parties according to the legal provisions under which they arose; otherwise, they shall be effective against third parties from the date of their publication in the Unified Register of Rights on Movable Property.
A draft Royal Decree has been prepared accordingly, its text is attached hereto.
Prime Minister
Movable Property Security Law and its Executive Regulation
Chapter 1: Definitions
Article 1
The following words and phrases - wherever they appear in this Law - shall have the meanings specified next to each:
Law: Law on the Guarantee of Rights in Movable Property.
Regulation: Implementing Regulation of the Law.
Ministry: Ministry of Commerce.
Minister: Minister of Commerce.
Right of Guarantee: A real right that is established on a guarantee provided, or agreed to be provided; as a security for the fulfillment of an Obligation.
Guarantee: Movable Property provided, or agreed to be provided; as a security for the fulfillment of an Obligation.
Secured Obligation: An Obligation for which the guarantee has been provided as security for its fulfillment, including financial obligations whether monetary or non-monetary, obligations to perform an action or refrain from an action, and all types of obligations, both current and future, including those that are fixed or contingent upon a condition.
Beneficiary: A natural or legal person for whose benefit the right of guarantee has been provided.
Guarantor: A natural or legal person providing the right of guarantee.
Obligor: A natural or legal person who is liable for the secured Obligation, if they are not the Guarantor.
Debtor's Estate: A monetary right - not secured - of the Debtor against others, whether due or deferred.
Guarantee by Assignment of Right: An agreement between a Creditor and another person whereby this person assigns their rights against others as security for the payment of their debt to the Creditor.
Register: The unified register of rights on movable property.
Publicity: The registration of the right of guarantee and any changes thereto in the register.
Inventory: Goods held for the purpose of sale or lease, raw materials, and materials in the process of manufacturing and transformation.
Real Estate by Allocation: Movable property that its owner places in a real estate for the purpose of serving or exploiting the real estate on a permanent basis, even if it is not physically connected to the real estate.
Returns: The yield or allowance, whether in kind or cash, obtained from the disposal of the guarantee or the benefit derived from it or the exchange of it for another, including its produce, growth, compensation for any decrease in its value or damage, or any other compensation related to that guarantee, and does not include the proceeds of enforcement based on the provisions of the Law.
Chapter 2: Scope of Application
Article 2
The provisions of this Law shall apply to any contract or transaction that includes the creation of a security interest over a collateral, including:
a) commercial pledge;
b) sale of a movable property that includes a condition for recovery or repurchase thereof;
c) transfer of ownership of a movable property as security;
d) sale of a movable property, provided that the transfer of ownership is postponed until payment is made;
e) security by transfer of right; and
f) sale of rights in accounts receivable.
Article 3
A collateral may be any movable property, whether tangible or intangible, current or future; whether current or future rights; whether owned by a guarantor, a secured creditor, or a third party, including:
a) rights held by a third party, whether due or deferred, including accounts receivable;
b) credit accounts with banks and other financial institutions, including deposit accounts and current accounts;
c) instruments transferable by delivery or indorsement, which establish entitlement to an amount or ownership of goods, including commercial papers, bank certificates of deposit, and bills of lading;
d) vehicles and the like;
e) equipment and work tools;
f) inventory;
g) animals and animal products;
h) crops;
i) fixtures; and
j) trees, even before they are cut down, and minerals, even before they are extracted.
Article 4
The provisions of this Law shall not apply to the following transactions :
a) Transfer of right for debt collection purposes .
b) Purchase of a debt that is part of a project acquisition agreement.
Article 5
The provisions of this Law shall not apply to security interests relating to:
a) vessels and aircraft;
b) securities listed in the capital market;
c) goods deposited in public warehouses, unless the security interest has been created prior to their deposit;
d) trademarks;
e) investment accounts; and
f) properties with title records wherein security interests are entered.
Chapter 3: Creating a Security Interest
Article 6
1. A security interest shall be deemed valid and effective among the parties thereto if:
a) it is written, either in a separate contract or included in another contract;
b) the guarantor is entitled to create a security interest over a collateral;
c) a secured obligation is described in general or specific terms; this shall include determination of its upper limit;
d) a collateral is described in general or specific terms to make it identifiable; this shall include describing it as the guarantor’s entire property, or as a specific or general category or type of the guarantor’s property; and
e) a secured creditor performs or undertakes to perform his obligation in return for a secured obligation .
2. A security interest is created to secure one or more obligations, whether such obligation is prior to, coinciding with, or subsequent to the date on which the security interest is created.