Debt Collection Agency Saudi Arabia
Amicable Debt Collections Saudi Arabia
1. General information
Saudi Arabia are one of the most challenging countries in the world to do collections.
Constant follow-ups and reliance on personal relationships are required to manage debt collections; harassment will stop the communication and reduce the chances of collecting. Cosmopolite Collections follow a collection process that is professional at all times, with the objective of retaining the relationships between our clients and their debtors whenever possible.
Our team of collection specialists carry out the collection process in-house. They relentlessly pursue debtors verbally and in writing within the bounds of federal and state laws.
1.2. Local agents
We can offer a field service for visiting debtors who are located in Jeddah, Riyadh or any other cities.
1.3. Interest
From a cultural point of view, Saudi debtors are not used to paying late payment interests. Under traditional Islamic law (Shariah), a late payment interest clause makes a contract void or invalid on account of the fact that Islam regards interest as a form of excessive remuneration (‘usury’).
1.4. Debt Collection Costs Saudi Arabia
From a cultural point of view, Saudi debtors are not used to paying collection costs. Under traditional Islamic law (Shariah), a collection costs clause makes a contract void or invalid on account of the fact that Islam regards collection costs as a form of excessive remuneration (‘usury’).
2. Legal Debt Collections Saudi Arabia
2.1. General information
Entering into legal proceedings is not possible without a prior warning to the debtor sent via a notary public.
Courts may try to mediate between the creditor and the debtor or even allow parties to conciliate between them.
Court orders may take up to one year to be issued in the first instance and the creditor may have to wait for a time period up to three years in order to have a final and irrevocable judgment.
2.2. Required documents
In order to file a claim against the debtor, Cosmopolite Collections need a notarised power of attorney, signed and stamped and legalised up to the Saudi Arabian Embassy, copies of the contract, invoices and a clear statement of account (signed and stamped) indicating payments and credit notes that have been booked regarding the outstanding invoices.
We also need orders, order confirmations, delivery notes, invoices and the likes. Basically, every step of the trading relationship should be provable by documentation.
Also note that the court would request the originals of all of these copies.
We would also like to receive all emails exchanged between the debtor and the creditor, as this would facilitate the tasks of our lawyers, who may find many relevant and enforceable statements therein.
2.3. Legal proceedings
The collection of trade instruments, e.g. checks, promissory notes, and enforcing judgments, can be performed through the Enforcement Court. Unlike regular courts, the Enforcement Court does not set hearing dates.
The judge directly passes an order against the debtor to pay within 21 days from the date of filing the case and a summons is either sent by post or published in a daily newspaper.
The Enforcement Court is very aggressive, and the nonappearance or refusal to pay by the debtor could result in one or more of the followings:
1. The seizure of the debtor’s Commercial Registration certificate (CR), halting the business operations of the
debtor
2. The issuance of an arrest warrant against the individual and the general manager of the defendant company
3. The freezing of bank accounts
4. Travel bans
5. A notification to the labour office to stop its services to the defendant company
6. The impounding of movable and other immovable
property; and/or
7. An order to liquidate the defendant company to recover
the claim amount.
2.4. Lawsuit in Saudi Arabia
The regular lawsuit procedure commences either directly after the debtor has refused to pay or after they have received a legal notice via a notary public.
Depending on the case, a summons can be served on the defendant by a lawyer, the police, or the court within five days from the date the case is filed.
Each hearing is usually scheduled from four to six weeks after that, but delays will invariably occur.
Either party can appeal a judgment within 30 days from the date the judgment is issued.
2.5. Debt Collection Costs Saudi Arabia
All costs depend on the amount of the outstanding principal and are calculated according to pre-established slices.
There are different fees that can apply during the proceedings, so there is not only a range regarding the outstanding amount but also a range regarding the possible fees for each action.
This makes it difficult to predict the total costs. In addition to this, costs of witnesses and/or experts might also arise.
A cost estimation will be provided case by case should legal action becomes necessary.
2.6. Expected time frame
The average duration of a legal enforcement process is between eight and 12 weeks, whereas a court procedure of first instance can take up to 12 months or longer, depending on the complexity of the case as well as the availability of the judge and lawyers on all sides. Sometimes a final irrevocable court order can take up to 36 months.
2.7. Interest and costs in the legal phase
The local Saudi courts may discretionally charge the losing party to compensate for the costs incurred by the losing party and based on the total amount of the claim.
Interest rates will not be charged by the local courts in any case whatsoever as this would be against Shariah Islamic laws.
3. Insolvency proceedings
3.1. General information
The aim of the insolvency proceedings is to pay out all creditors with the same quota by liquidating the assets of the debtor company or collecting the enforceable income of the individual who is declared bankrupt.
3.2. Proceedings
A recently enacted and sophisticated bankruptcy law No. M/05 dated 28/05/1439H (corresponding to 13/02/2018G) will become effective from June 2018.
The liquidation can be initiated at the request of the debtor themselves, the creditors or any other competent government authorities, provided that the debtor must be going through an actual financial distress or bankruptcy.
The creditors’ debts will be subject to certain conditions in order to be accepted by the court as follows:
- The debt must be due with a certain value, cause and warranties (if any)
- The debt value or the total of the creditors’ debts must not be less than the value determined by the committee – an independent administrative and financial legal body that oversees all bankruptcy matters
- The debt must be due based on an enforcement note or any other note, provided that the creditors can prove that they have requested the debtor to fulfil such amounts within 28 days prior to submitting the liquidation request to the relevant court.
The relevant court will have the right to impose any preventative procedures based on their sole discretion or at the request of any concerned party.
Moreover, a bankruptcy licensed trustee will be appointed to carry out the liquidation procedures and the debtor of the entity under liquidation will be prohibited from managing their business operations upon the commencement of the liquidation.
3.3. Required documents
In order to lodge a claim on the client’s behalf, Cosmopolite Collections need:
- A notarised power of attorney, signed and stamped and legalised up to the Saudi Arabian Embassy
- Copies of invoices
- Copies of contracts
- Copies of orders, order confirmations and delivery notes
- Copies of general conditions of sale, if there are any
- Copies of any other correspondence that may verify the claim.
3.4. Expected time frame and outcome
After the proceedings start, lodging claims is possible within a given deadline. The liquidator can either accept a lodged debt or dispute it.
IIf the claim is disputed, the creditor may only file a claim in court to prove the justification of their claim when further documentation does not convince the liquidator to confirm the debt.
At the end of the proceedings, all creditors with confirmed debts will receive a dividend if enough assets are in the estate.
Often the insolvency estate is closed with a very small or no dividend at all.
Collecting business debts in Saudi Arabia can be challenging for foreign companies due to the country's complex legal system and cultural differences. However, with the help of a professional debt collection agency, the process can be made easier and more efficient.
Saudi Arabia is a monarchy with a unified legal system based on Islamic law. The official language is Arabic, and the currency is the Saudi riyal.
There are several debt collection agencies operating in Saudi Arabia, and the industry has been established in the country for some time. The national credit bureau in Saudi Arabia is called the Saudi Credit Bureau, and some private credit reporting companies include Experian, TransUnion, and Equifax.
Debt collection laws in Saudi Arabia are generally uniform across the country, although local laws may also apply in certain cases.
There are several benefits to using commercial debt collection services in Saudi Arabia:
- Expertise in navigating the local legal and cultural considerations involved in debt collection in Saudi Arabia.
- Access to a network of local debt collectors who are proficient in Arabic.
- Professionalism and discretion in all communication with debtors.
- The ability to handle a large volume of debts efficiently.
- Flexibility in tailoring debt collection strategies to the needs of individual creditors.
- A high success rate in recovering debts in Saudi Arabia.
- Availability of online resources and support for creditors.
Our debt recovery agency has a very high success rate in Saudi Arabia thanks to our local debt collectors and our comprehensive online resources and support for creditors. We have local debt collection managers in the main cities of Riyadh, Jeddah, and Dammam.
