Article 19 of the Saudi Law on Security Rights in Movable Assets

This article deals with the case of multiple creditors over one item of collateral, and determines who recovers his right first.

Multiple security rights (paragraph 1): the grantor may create more than one security right over the same collateral.

Meaning of priority (paragraph 2): it is the secured party's right to be ahead of other creditors in recovering the secured obligation from the collateral. Priority among the secured parties is ranked as follows:

1. A security right that is effective against third parties takes priority over one that is not.
2. One made effective by registration takes priority over other effective security rights.
3. Between two or more rights made effective by registration: priority goes to the one earlier in the date and time of registration.
4. Between two or more rights made effective by transfer of possession: priority goes to the one earlier in the date and time of possession.
5. Between two or more rights that are not effective: priority goes to the one earlier in the date and time the security right was created.

The exception (paragraph 3): the Implementing Regulations may, where necessary, set special priorities for security rights in particular transactions or assets, and the article does not state these cases.

Practical lesson: early registration is the strongest means of protecting a creditor, since a registered right takes priority over a right made effective by possession, and precedence between registered rights is counted by date and time. This shows the importance of the certified extract that Article 18 makes a means of proving the date and time of registration. It is followed by Article 20 on effective security rights ranking ahead of other debts. To assess your rank among creditors, it is advisable to consult a lawyer specialized in commercial and finance matters.