Article 10 of the Saudi Law on Security Rights in Movable Assets
المادة 10 من نظام ضمان الحقوق بالأموال المنقولة · الفصل الرابع: نفاذ حق الضمان في مواجهة الغير
The article extends a security right's effectiveness automatically to the proceeds of the collateral for fifteen days from the grantor's receipt of them unless excluded, after which it lapses except for identifiable cash proceeds or proceeds described in the registration.
Official text (Arabic)
This article has not been amended since the law was issued.
1- يستمر حق الضمان النافذ في مواجهة الغير تلقائيًّا على عوائد الضمانة لمدة (خمسة عشر) يومًا من قبض الضامن لها، ما لم يتفق عند إنشاء حق الضمان على استثنائها.
2- ينقضي نفاذ حق الضمان على العوائد في مواجهة الغير بانقضاء المدة المنصوص عليها في الفقرة (1) من هذه المادة، ويستثنى من ذلك العوائد النقدية القابلة للتعيين أو العوائد الموصوفة في الإشهار.
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
The collateral may turn into something else, for example the grantor sells it and receives its price, or it is destroyed and he receives compensation. This is what the Law calls proceeds, which according to Article 1 are the income or the in-kind or cash substitute obtained from disposing of the collateral, benefiting from it or replacing it, including its products and compensation for its destruction.
The rule (paragraph 1): if the security right is effective against third parties, it continues automatically over the proceeds of the collateral for fifteen days from the date the grantor receives them, unless the parties agreed when creating the security right to exclude the proceeds.
Lapse of effectiveness (paragraph 2): when the fifteen days end, the security right's effectiveness over the proceeds against third parties lapses, with two kinds excepted from the lapse:
- Identifiable cash proceeds, that is, sums that can be distinguished and identified.
- Proceeds described in the registration, that is, those the secured party mentioned when registering his right in the Registry.
Practical effect: it is in the secured party's interest to describe the proceeds in the registration if he wants to protect his right over them after the fifteen-day period. This article follows Article 9 on replacing the method of effectiveness, and precedes Article 11 on collateral that is a right against a third party. To draft the registration in a way that protects the proceeds, it is advisable to consult a lawyer specialized in commercial and finance matters.
Practical example
A factory in Jeddah pledged its inventory to a financing company, which registered its right, and the factory then sold part of the inventory and received the price. The company's right remains effective over this price for fifteen days from receipt, and after that it continues only if the amount is identifiable or the proceeds are described in the registration.
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 Law on Security Rights in Movable Assets
Does a pledge extend to the sale price of the collateral?
Yes. An effective security right continues automatically over the proceeds of the collateral for fifteen days from the grantor's receipt of them, unless excluded when it was created.
What happens after the fifteen days end?
The security right's effectiveness over the proceeds against third parties lapses, except for identifiable cash proceeds or proceeds described in the registration.
Can the proceeds be excluded from the security right?
Yes, if the parties agree to that when creating the security right.
More articles on Effectiveness of a Security Right Against Third Parties
- Article 8
The article requires registration, or transfer of possession of the collateral to the secured party, for a security right to be effective against third parties, and refers to the Implementing Regulations the cases where possession is the only means.
1- يشترط لنفاذ حق الضمان في مواجهة الغير الإشهار، أو انتقال حيازة الضمانة إلى المضمون له انتقالاً مباشرًا أو غير مباشر سواء كان انتقالاً حقيقيًّا أو حكميًّا. 2-
- Article 9
The article provides that replacing the method of effectiveness of a security right from registration to possession, or the reverse, does not interrupt its continued effectiveness against third parties, subject to the cases where possession is the only means.
مع مراعاة حكم الفقرة (2) من المادة (الثامنة) من النظام، لا يؤثر استبدال طريقة نفاذ حق الضمان على الضمانة من الإشهار إلى الحيازة أو العكس، في استمرار نفاذ حق الض
- Article 11
The article provides that where the collateral is a right against a third party, the security right becomes effective against that third party from the date he is notified of its creation over the right.
إذا كانت الضمانة حقًّا لدى الغير، فيكون نفاذ حق الضمان في مواجهة ذلك الغير من تاريخ إبلاغه بإنشاء حق الضمان على الحق.
- Article 12
The article provides that a condition restricting the grantor's right to provide his receivables or assign his rights as security does not affect the validity or effectiveness of the security right, and the party who required it may still claim against the grantor.
لا يؤثر أي شرط في اتفاق يقيد حق الضامن في تقديم ديونه أو حوالة حقوقه ضمانة على صحة عقد إنشاء حق الضمان أو نفاذه، ولا يمنع ذلك الطرف الذي اشترط القيد لمصلحته من
- Article 13
The article provides that a registered security right stays effective if the collateral becomes real estate by designation, and is effective against creditors secured by that real estate, unless the collateral was designated before the real estate was mortgaged and the right was not registered.
1- أ- يستمر نفاذ حق الضمان في مواجهة الغير حتى وإن أصبحت الضمانة عقارًا بالتخصيص؛ إذا كان حق الضمان مشهرًا في السجل. ب- يسري نفاذ حق الضمان المشهر في الضمانة ال
- Article 14
The article provides that a security right stays effective against third parties if the collateral is attached to another movable asset in a way that allows it to be separated.
يستمر نفاذ حق الضمان في مواجهة الغير في حال إلحاق الضمانة بمال منقول آخر بشكل قابل للفصل.
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.