Article 11 of the Saudi Real Estate Investment Schemes Law
المادة 11 من نظام المساهمات العقارية · الفصل الثاني: الترخيص والاشتراكات
The article makes a scheme's net assets owned by the scheme and bars creditors of participants, the licensee and the scheme manager from any right in its funds or assets except what they own in shares.
Official text (Arabic)
This article has not been amended since the law was issued.
يكون صافي أصول المساهمة العقارية من أصول ثابتة نقدية وعينية أو حقوق لدى الغير؛ مملوكة للمساهمة العقارية. وليس لدائني المساهمين أو المرخص له أو مدير المساهمة العقارية أي حق في أموال المساهمة العقارية أو أصولها عدا ما يملكونه من الحصص في المساهمة العقارية.
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 11 explained in plain English
This article protects the scheme's funds from the debts of the parties connected with it, through two provisions:
1- The assets belong to the scheme. The scheme's net assets consist of fixed cash and in-kind assets or rights held with third parties, and all of these are owned by the real estate investment scheme itself, not by the licensee, the manager or any particular participant.
2- Creditors of the parties are barred from the scheme's funds. None of the following has any right in the scheme's funds or assets:
- Creditors of the participants.
- Creditors of the licensee.
- Creditors of the real estate investment scheme manager.
The only exception is the shares the debtor owns in the scheme. For example, the right of a participant's creditor does not extend to the scheme's land or account, but is limited to the shares their debtor owns.
The benefit is great: if the licensed developer falls behind on debts of its own, its creditors have no right to collect them from the scheme's funds except to the extent of its shares in it. This is linked to Article 10, which prohibits lending from the capital and regulates borrowing against assets, and to Article 12, which requires the licensee to retain a percentage in the scheme. Where there is a claim against a scheme's assets, you may consult a lawyer specialized in real estate matters.
Practical example
A development company in Riyadh accumulated debts to a bank on other projects, and it was the licensee of a real estate investment scheme. The bank tried to claim the scheme's land, but Article 11 limits its right to the shares the company owns in the scheme, excluding the scheme's funds and assets.
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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Lawyers who handle this kind of case
Dr. Ali Al-Rubaie Law Office and Ittihad Al-Asr Legal Company
Mohammed bin Saleh Al-Qarawi Law and Notary Office, Riyadh
Frequently asked questions about Article 11 of the Saudi Real Estate Investment Schemes Law
May creditors of the licensed developer take the scheme's funds?
No, the licensee's creditors have no right in the scheme's funds or assets other than what the licensee owns in shares.
Who owns the assets of a real estate investment scheme?
The scheme's net assets, made up of fixed cash and in-kind assets or rights held with third parties, are owned by the scheme itself.
If a participant has a debt, does it extend to the whole scheme?
No, the right of the participant's creditors is limited to the shares the participant owns in the scheme.
More articles on Scheme Capital and Shares
- Article 6
The article provides that a scheme's capital, on which the number and amount of shares are calculated, is set by the estimated cost from a licensed valuation entity after the approval of the Authority and the Capital Market Authority.
يحدد رأس مال المساهمة العقارية، الذي على أساسه يُحتسب عدد الحصص ومقدارها من خلال التكلفة التقديرية من قبل جهة تقييمية مرخصة، بعد موافقة الهيئة وهيئة السوق المال
- Article 7
The article allows the Authority to require a reserve amount, not exceeding 15% of the estimated cost, to be added to a scheme's capital, which may be used only with the participants' assembly's approval.
للهيئة اشتراط إضافة مبلغ احتياطي إلى رأس مال المساهمة العقارية بما لا يتجاوز (15%) من تكلفتها التقديرية، وذلك لمقابلة أي مصاريف إضافية غير متوقعة. ويكون التصرف
- Article 8
The article allows a participant to join a real estate investment scheme with an in-kind or cash share, and refers to the regulations the type of in-kind share and its conditions.
يحق للمساهم الاشتراك في المساهمة العقارية، بحصة عينية أو نقدية. وتحدد اللائحة نوع الحصة العينية والشروط الواجب توافرها فيها.
- Article 9
The article divides a scheme's capital into shares equal in value and rights, limits each participant's liability to the shares they own, and assigns regulation of the register of participants to the Capital Market Authority.
1- يقسم رأس مال المساهمة العقارية إلى حصص متساوية القيمة والحقوق، وتكون مسؤولية المساهمين في حدود ما يملكون من حصص في المساهمة العقارية. 2- تقوم هيئة السوق الما
- Article 10
The article prohibits lending from a scheme's capital and allows borrowing against the scheme's funds or assets if the scheme agreement includes this, under the conditions the regulations set.
لا يجوز الإقراض من رأس مال المساهمة العقارية، ويجوز الاقتراض بضمان أموال أو أصول المساهمة العقارية على أن يتم تضمين اتفاقية المساهمة ذلك، وتحدد اللائحة الاشتراط
- Article 12
The article requires the licensee's percentage in the scheme to be no less than the regulations specify and held until the scheme ends, and allows other participants to dispose of their shares under the regulations' conditions.
1- يجب ألا تقل نسبة المرخص له في المساهمة العقارية عن النسبة التي تحددها اللائحة، وأن يحتفظ لنفسه بملكية هذه النسبة حتى انقضاء المساهمة العقارية. 2- يجوز لبقية
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.