Article 17 of the Saudi General Warehouses Law
المادة 17 من نظام الإيداع في المخازن العامة
The secured creditor satisfies his right from the price of the goods in priority over all creditors after deducting taxes, fees and the expenses of sale, storage and keeping, and any surplus is deposited in a bank if the receipt holder is absent.
Official text (Arabic)
This article has not been amended since the law was issued.
يستوفي الدائن المرتهن حقه من ثمن البضاعة بالامتياز على جميع الدائنين بعد خصم المبالغ التالية :
أ- الضرائب والرسوم المستحقة على البضاعة.
ب- مصروفات بيع البضاعة وتخزينها وغيرها من مصروفات الحفظ والتسليم.
وإذا لم يكن حامل إيصال التخزين موجودا وقت بيع البضاعة أودع المبلغ الزائد على ما يستحقه حامل مستند الرهن في أحد البنوك المحلية.
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 17 explained in plain English
This article sets out how the price of the goods is distributed after they are sold, as in a sale permitted by the Board of Grievances under Article 16.
First: what is deducted before the secured creditor
- The taxes and fees due on the goods.
- The expenses of selling and storing the goods, and other expenses of keeping and delivery.
Second: the secured creditor's right
After these amounts are deducted, the secured creditor satisfies his right from the price in priority over all creditors, meaning he comes ahead of the debtor's other creditors in satisfying his right from the price of these goods.
Third: the surplus amount
If the holder of the storage receipt is not present at the time the goods are sold, the amount in excess of what the holder of the pledge document is due is deposited in a local bank.
The article sets out a clear order: the taxes, fees and the expenses of sale, storage, keeping and delivery first, then the secured creditor, then any excess goes to the holder of the receipt or is deposited for his account in a local bank if he is not present.
Article 18 then deals with the case where the price is not enough to pay the debt: the holder of the pledge document may not have recourse against the pledging debtor or the endorsers except after the goods are sold and their price proves insufficient, and within ten days of the date of sale. Anyone who needs to calculate the rights in a particular sale is best advised to consult a lawyer specializing in commercial matters or finance.
Practical example
Pledged goods were sold for SAR 300,000, the taxes, fees and expenses of sale and storage were SAR 20,000, and the secured debt was SAR 200,000. Under this article SAR 20,000 is deducted first, then the secured creditor satisfies SAR 200,000 in priority over the other creditors. Because the holder of the storage receipt was not present at the time of sale, the surplus amount of SAR 80,000 is deposited in a local bank.
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 17 of the Saudi General Warehouses Law
Who is paid first from the price of pledged goods?
The secured creditor satisfies his right in priority over all creditors, after deducting the taxes and fees due on the goods and the expenses of their sale, storage, keeping and delivery.
What happens to the surplus after the goods are sold?
If the holder of the storage receipt is not present at the time of sale, the amount in excess of what the holder of the pledge document is due is deposited in a local bank.
Are storage expenses deducted from the sale price?
Yes. The expenses of selling and storing the goods and other expenses of keeping and delivery are deducted before the secured creditor satisfies his right.
More articles on Loans Secured by Pledged Goods
- Article 5
The article allows the general warehouse to provide loans secured by a pledge of the goods kept with it, and to deal in the pledge documents representing them after the pledgor's consent.
يجوز للمخزن العام أن يقدم قروضا مكفولة برهن البضاعة المحفوظة لديه، وأن يتعامل بمستندات الرهن التي تمثلها بعد موافقة الراهن.
- Article 15
The article allows the holder of the storage receipt, separated from the pledge document, to pay the secured debt before it falls due, and if payment is impossible or refused, to deposit it with a local bank, whereupon the goods are released.
يجوز لحامل إيصال التخزين ـ منفصلا عن مستند الرهن ـ أن يدفع الدين المضمون بهذا المستند ولو قبل حلول ميعاد استحقاق الدين. وإذا تعذر الوفاء لحامل مستند الرهن أو رف
- Article 16
The article allows the holder of the pledge document, separated from the storage receipt, to ask the Board of Grievances for permission to sell the pledged goods if the debt is not paid when due; the Board determines the method of sale and notifies the warehouse keeper and the owner of the receipt.
إذا لم يدفع الدين في ميعاد الاستحقاق جاز لحامل مستند الرهن ـ منفصلا عن إيصال التخزين ـ أن يطلب من ديوان المظالم الإذن له في بيع البضاعة المرهونة، ويحدد الديوان
- Article 18
The holder of the pledge document may have recourse against the debtor or endorsers after the goods are sold and their price proves insufficient, within 10 days of the sale; recourse against endorsers lapses if enforcement is not started within 30 days.
لا يجوز لحامل مستند الرهن الرجوع على المدين الراهن أو المظهرين إلا بعد بيع البضاعة المرهونة وعدم كفاية ثمنها للوفاء بالدين وأن يكون ذلك خلال عشرة أيام من تاريخ
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.