MEPI-Funded CLDP Engagement Results in New Insolvency Laws in Bahrain and Saudi Arabia

The Department of Commerce’s Commercial Law Development Program (CLDP), which provides direct government-to-government technical assistance worked with legislative drafters, judges, and private sector stakeholders to deliver updated insolvency laws that will reduce the rate of business failure in Bahrain and Saudi Arabia. The passage of the laws earlier this year is a major achievement for both government officials and the business community; the laws will go into effect by the end of the year.

The new laws have decriminalized the act of declaring bankruptcy and will help prevent liquidation of potentially viable businesses by allowing many companies to:

  • Seek bankruptcy protection before becoming insolvent,
  • Negotiate restructured debt payments and continue commercial activity,
  • Continue to manage businesses and request financing during the bankruptcy process, and
  • Potentially start new businesses after a prior business failure resulting in bankruptcy and liquidation. (Prior to the enactment of these laws, individuals involved in bankruptcies were prevented from starting businesses in the future.)

As Bahrain and Saudi Arabia seek to increase entrepreneurship, bolster economic diversification and attract additional foreign investment, the new laws represent a key step in encouraging startups, fostering business growth, and boosting investor confidence.