Article 26 of the Saudi Law on Security Rights in Movable Assets

This article answers two questions: how are the enforcement proceeds distributed? And what happens if they exceed or fall short?

1) Order of distribution if the proceeds are insufficient (paragraph 1):

1. The costs of the steps needed to repair the collateral, improve it and prepare it for sale.
2. The costs of enforcement against the collateral.
3. What is due to the holders of security rights by priority under the provisions of the Law.

2) The surplus (paragraph 2): in non-judicial enforcement, the secured party is responsible for returning the remaining sums to the grantor after satisfying the rights mentioned in paragraph (1). The creditor does not keep more than he is owed.

3) The shortfall (paragraph 3): the debtor of the secured obligation remains liable to the secured party for any shortfall in recovering his right, and this shortfall is an unsecured debt. That is, the creditor may claim the remainder from the debtor, but claims it as an ordinary creditor without security.

Relation to the neighboring articles: Article 25, before it, provides that the collateral is cleared of the rights by enforcement, so those rights turn into claims on the proceeds in this order. Article 27, after it, moves on to the provisions on the Registry.

Note that paragraph (3) speaks of "the debtor of the secured obligation", who may not be the grantor himself if another person provided the collateral. To work out your rights in the distribution of enforcement proceeds, it is advisable to consult a lawyer specialized in commercial and finance matters.