Enforcement imposes strict controls on liquidators to protect shared funds
In a move aimed at enhancing transparency and improving the efficiency of the judicial and economic systems in the Kingdom of Saudi Arabia, the Enforcement and Liquidation Center ( Enfath ) has released a draft guide for liquidators of jointly owned assets through the “Istilaa” platform. This initiative is part of the center’s ongoing efforts to strengthen liquidation, division, and receivership procedures, and to ensure the application of the highest professional standards, thereby guaranteeing the rights of all stakeholders.
Organizational context to enhance trust
The Enforcement and Liquidation Center (Enfaz) is a key pillar of the Saudi judicial and economic system, operating as an independent government entity that strives to expedite the fulfillment of rights and enhance beneficiary satisfaction. These new regulations are significant because they address regulatory gaps that may arise in estate and company liquidation processes, directly contributing to improving the business environment and attracting investment by ensuring the swift reintegration of distressed assets into the economic cycle.
The guidelines stipulate that the liquidator is appointed by the Center to perform his duties in his own name and only within the scope of the assigned mandate. He is not considered a representative or agent of the Center, and his actions do not create any legal obligations for the Center towards third parties. The guidelines prohibit the liquidator from exceeding his delegated authority and require him to refrain from any action that may be ambiguous until he consults with the Center. Furthermore, they emphasize that all his actions are subject to direct supervision, granting the Center the right to hold him accountable and impose statutory penalties.
Strict mechanisms for asset protection
Regarding the protection of funds , the guidelines established strict red lines, prohibiting the liquidator from appropriating, settling, or assigning any part of the jointly owned funds in any way, except in the case of a valid power of attorney from all partners, excluding any minors or those under a waqf (endowment). The regulations also mandated immediate possession of the assets upon acceptance of the assignment, holding the liquidator fully responsible for any delays.
The regulations also mandate the development of security and management plans to safeguard and maintain assets and prevent their depreciation, along with the immediate reporting of any loss or theft. These measures address previous challenges faced by liquidation processes, namely the erosion of asset value over time or their vulnerability to damage.
Financial and legal controls
On the financial front, the liquidator is obligated to collect all revenues and proceeds from assets and deposit them into the designated bank account. A comprehensive financial statement, certified by a chartered accountant and adhering to the standards of the Saudi Organization for Certified Public Accountants, must also be prepared. The regulations include provisions for fixed debts and a cash reserve of 10% of the estate's balance, up to a maximum of one million riyals. Additionally, partners' debts must be settled directly by deducting them from their respective shares.
On the legal side, the guide stipulated that the appointed lawyer must be licensed with at least 5 years of experience in litigation and 8 years in appeal, giving top priority to amicable solutions before resorting to the courts, which is consistent with the general trends to reduce the flow of cases to the courts and speed up the resolution of disputes.
Finally, the guide obliges the liquidator to pay taxes, wages, and maintenance costs through the electronic system, while applying strict standards in information confidentiality, protecting personal data, and adhering to approved cybersecurity controls, to ensure a safe and reliable liquidation environment.
