Article 4 of the Saudi Law on Security Rights in Movable Assets
المادة 4 من نظام ضمان الحقوق بالأموال المنقولة · الفصل الثاني: نطاق التطبيق
The article excepts two transactions from the Law: assignment of a right for debt collection purposes, and purchase of a debt that is part of an agreement to acquire a business.
Official text (Arabic)
This article has not been amended since the law was issued.
لا تسري أحكام النظام على المعاملتين الآتيتين:
أ- حوالـة الحـق لغايات تحصيل الديون.
ب- شراء دين يكون جزءًا من اتفاقية تملك مشروع.
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 4 explained in plain English
After Article 3 sets out the movable assets that may be collateral, this article takes two transactions only out of the scope of the Law:
- Assignment of a right for debt collection purposes: that is, a creditor transfers his right to another person so that the latter collects the debt. The purpose of this assignment is collection, not security, so it is not subject to the provisions of this Law.
- Purchase of a debt that is part of an agreement to acquire a business: that is, purchase of a debt that comes within a broader deal to acquire a business.
What is the effect of this exception? The provisions of the Law do not apply to these two transactions. The article does not state the alternative rules these two transactions are subject to; that is a matter for other laws.
Note the difference between assignment of a right for collection, which is excepted here, and security by assignment of a right, which falls within the scope of the Law and is, according to the definition in Article 1, an agreement under which a person provides his rights against third parties as security for his debt to the creditor. The deciding factor is the purpose of the assignment: collection or security.
It is followed by Article 5, which excepts security rights relating to certain assets. To determine the nature of a particular assignment or deal, it is advisable to consult a lawyer specialized in commercial and finance matters.
Practical example
A supply company in Jeddah assigned its invoices owed by its customers to a specialized company to collect them on its behalf. This is an assignment for collection purposes, so the provisions of the Law do not apply to it. But if the company assigned the same invoices to a bank as security for a loan it obtained, that is security by assignment of a right, which falls within the scope of the Law.
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 4 of the Saudi Law on Security Rights in Movable Assets
Does the Law on Security Rights apply to assignment for debt collection?
No. The article excepts assignment of a right for debt collection purposes from the application of the Law.
What transactions are excepted in Article 4?
Assignment of a right for debt collection purposes, and purchase of a debt that is part of an agreement to acquire a business.
What is the difference between a collection assignment and security by assignment of a right?
A collection assignment is for collecting the debt and is excepted, while security by assignment of a right provides rights against third parties as security for a debt and falls within the Law, as defined in Article 1.
More articles on Definitions and Scope of the Law
- Article 1Amended by M/191
The article defines the key terms of the Law on Security Rights in Movable Assets, such as security right, collateral, grantor, secured party, Registry, registration, real estate by designation and proceeds.
يُقصد بالألفاظ والعبارات الآتية -أينما وردت في هذا النظام- المعاني المبينة أمام كل منها: النظام: نظام ضمان الحقوق بالأموال المنقولة. اللائحة: اللائحة التنفيذية
- Article 2
The article applies the Law to any contract or transaction creating a security right over collateral, including commercial pledge, sale with repurchase, transfer of title for security, retention of title, assignment security and sale of receivables.
تسري أحكام النظام على أي عقد أو معاملة تتضمن إنشاء حق ضمان على الضمانة، ويشمل ذلك بوجه خاص الآتي: أ- الرهن التجاري. ب- بيع المال المنقول المتضمن شرطًا باسترداده
- Article 5
The article excepts from the Law security rights over ships, aircraft, listed securities, trademarks, investment accounts, assets with ownership registries, and goods in public warehouses unless the right preceded deposit.
لا تسري أحكام النظام على حقوق الضمان المتعلقة بالآتي: أ- السفن، والطائرات. ب- الأوراق المالية المدرجة في السوق المالية. ج- البضائع المودعة في المخازن العامة ما
- Article 28
The article requires the Minister of Commerce to issue the Regulations within thirty days of the Law's publication, covering in particular registration procedures, searching the registry and obtaining extracts, and the fees for registry services.
يصدر الوزير اللائحة خلال (ثلاثين) يومًا من تاريخ نشر النظام في الجريدة الرسمية، على أن تتضمن بوجه خاص الآتي: أ- إجراءات الإشهار. ب- إجراءات البحث في السجل والحص
- Article 29
The article provides that the Law on Security Rights in Movable Assets takes effect from the date of its publication in the Official Gazette.
يعمل بالنظام من تاريخ نشره في الجريدة الرسمية.
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.