Article 10 of the Saudi Commercial Pledge Law
المادة 10 من نظام الرهن التجاري · الفصل الرابع: المال المرهون
The article provides that the whole pledged asset secures the whole debt unless otherwise agreed, and permits pledging an undivided part of a movable asset even if it cannot be divided.
Official text after amendments (Arabic)
Compiled from the original text and every officially published amendment; the amendments are shown in full below for comparison.
2- يعد كل المال المرهون ضامناً لكامل الدين، ما لم يتفق على غير ذلك.
3- يجوز رهن جزء من مال منقول ولو استحالت قسمته أو فرزه، ويقع الرهن في هذه الحال على الجزء المرهون مشاعًا، وتحدد اللائحة -بالتنسيق مع وزارة العدل- الضوابط والأحكام المنظمة لانتقال حيازة المال المرهون مشاعاً والتنفيذ عليه.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 10 explained in plain English
In its current text this article contains only paragraphs (2) and (3), because Royal Decree No. M/94 dated 15/8/1441 AH deleted paragraph (1).
First: the whole pledged asset secures the whole debt (paragraph 2)
As a rule, the whole pledged asset secures the entire debt. This means that paying part of the debt does not automatically release a corresponding part of the pledged asset, and the whole asset remains security for what is left of the debt. But this rule may be varied by agreement, so the pledgor and the pledgee may agree, for example, that a specific part of the asset secures a specific part of the debt. This is consistent with the definition of secured debt in Article 1 as the debt, or the part of the debt, for which the pledged asset was provided as security.
Second: pledging an undivided part (paragraph 3)
- A part of a movable asset may be pledged, even if dividing or separating the asset is impossible.
- In this case the pledge falls on the pledged part as an undivided share, that is, on a common share in the whole asset, not on a separated part of it.
- The Regulations, in coordination with the Ministry of Justice, set the rules and provisions governing the transfer of possession of an asset pledged as an undivided share and enforcement against it. The article does not detail these provisions itself.
The article comes after Article 9, which permits agreeing to provide a future asset as a pledged asset, provided that both parties expect it to come into existence and the pledgor acquires it before the debt falls due, and treats the pledge as effective from the date of the agreement.
When drafting a pledge over an undivided share or over several assets, it is advisable to use a lawyer specialized in commercial or finance matters.
Practical example
A merchant in Dammam owns half of a large printing machine in partnership with another person, and the machine cannot be divided. The merchant pledged his share to a financier to secure financing, so the pledge falls on the half as an undivided share. If the merchant pays part of the financing, his whole pledged share remains security for the rest of the debt, unless he agreed otherwise with the financier.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 10 of the Saudi Commercial Pledge Law
Does the pledged asset secure the entire debt?
Yes. The whole pledged asset is considered to secure the entire debt unless the parties agree otherwise.
Can an undivided share of a movable asset be pledged?
Yes. A part of a movable asset may be pledged even if dividing or separating it is impossible, and the pledge falls on the pledged part as an undivided share.
Who sets the rules for enforcing against an asset pledged as an undivided share?
The Regulations set them in coordination with the Ministry of Justice, including the transfer of possession of an asset pledged as an undivided share and enforcement against it.
Amendment history
Royal Decree No. M/94 — 15/8/1441 AH
Official amendment text (Arabic)
- حذف الفقرة (1) من هذه المادة وذلك بموجب المرسوم الملكي رقم (م/94) وتاريخ 1441/8/15هـ.
Original text before the amendments (Arabic)
1- يشمل الرهن ملحقات المال المرهون وأجزاءه وريعه، إلاَّ إن اتفق في عقد الرهن على استثناء الريع.
2- يعد كل المال المرهون ضامناً لكامل الدين، ما لم يتفق على غير ذلك.
3- يجوز رهن جزء من مال منقول ولو استحالت قسمته أو فرزه، ويقع الرهن في هذه الحال على الجزء المرهون مشاعًا، وتحدد اللائحة -بالتنسيق مع وزارة العدل- الضوابط والأحكام المنظمة لانتقال حيازة المال المرهون مشاعاً والتنفيذ عليه.
More articles on Conditions of the Pledged Asset
- Article 8
The article requires the pledgor to own the pledged asset and have capacity to dispose of it, and the asset to be saleable or valuable, and bars pledging estate and bequest assets before the pledgor owns them.
1- يجب أن يكون الراهن مالكًا للمال المرهون عند إبرام العقد وأهلاً للتصرف فيه، فإن تبين ما يخالف ذلك بعد التعاقد فللدائن المرتهن حسن النية التمسك بحقه في رهن بدي
- Article 12
The article permits pledging more than one movable asset to secure the same debt, and gives the pledgee the right to set the order of enforcement against them unless otherwise agreed.
يجوز رهن أكثر من مال منقول لضمان الدين نفسه، ويحق للمرتهن في هذه الحال تحديد ترتيب التنفيذ على هذه الأموال، ما لم يُتفق على غير ذلك.
- Article 38Amended (1411 AH)
The article permits pledging all of the pledgor's movable assets, a part or class of them, or an adequately described asset, and states when enforcement may take place and the pledgor's right to dispose of the assets before default.
1- يجوز رهن جميع الأموال المنقولة المملوكة للراهن أو جزء منها أو فئة منها، ويجوز كذلك رهن أي مال منقول موصوف وصفً عاماً وكافياً لتعيينه 2- يكون التنفيذ على الره
- Article 43
The article refers the determination of a pledged asset's value and average valuation to the Regulations' rules and procedures, unless the body competent for certain types of assets has its own special procedures.
تحدد قيمة المال المرهون ومتوسط التقويم في الحالات المنصوص عليها في النظام وفق القواعد والإجراءات التي تبينها اللائحة، ما لم يكن لدى الجهة المختصة بتنظيم أنواع م
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.