Article 5 of the Saudi General Warehouses Law
المادة 5 من نظام الإيداع في المخازن العامة
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.
Official text (Arabic)
This article has not been amended since the law was issued.
يجوز للمخزن العام أن يقدم قروضا مكفولة برهن البضاعة المحفوظة لديه، وأن يتعامل بمستندات الرهن التي تمثلها بعد موافقة الراهن.
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 5 explained in plain English
This article gives the general warehouse two financial powers connected with the goods it keeps:
- Providing loans secured by a pledge of the goods: the general warehouse may lend to the depositor or to others a loan for which the goods kept with it serve as security.
- Dealing in pledge documents: it may deal in the pledge documents that represent these goods, but after the pledgor's consent.
A pledge document, as Article 2 defines it, is a certificate issued by the general warehouse keeper containing clear details of the deposited goods, their value, the rights encumbering them, and other details recorded in the storage receipt. It is the instrument that makes the goods pledgeable without leaving the warehouse.
The important restriction in the article is that dealing in pledge documents depends on the pledgor's consent, so the general warehouse does not dispose of them on its own.
Note that Article 4 bars the warehouse keeper from engaging in commercial activity or speculating in goods of the type he is licensed to keep, yet this article permits loans secured by a pledge of the goods. The article does not specify the conditions, interest or terms of these loans. Article 6 then sets out the depositor's obligations, including providing correct details of the goods and their value. Anyone wishing to obtain financing secured by their goods is best advised to consult a lawyer specializing in banking and finance or commercial matters.
Practical example
A merchant in Jeddah deposited a quantity of sugar in a general warehouse and needed liquidity. Under this article the general warehouse may provide him a loan secured by a pledge of the sugar kept with it, and the warehouse deals in the pledge document representing the sugar only after the pledgor's consent.
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 5 of the Saudi General Warehouses Law
Can I get a loan from a general warehouse against my goods?
Yes. The general warehouse may provide loans secured by a pledge of the goods kept with it.
Can the general warehouse dispose of a pledge document without permission?
No. It may deal in the pledge documents representing the goods only after the pledgor's consent.
More articles on Loans Secured by Pledged Goods
- 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 17
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.
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 و
- 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.