Article 8 of the Saudi Law on Security Rights in Movable Assets
المادة 8 من نظام ضمان الحقوق بالأموال المنقولة · الفصل الرابع: نفاذ حق الضمان في مواجهة الغير
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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- استثناءً من حكم الفقرة (1) من هذه المادة، تحدد اللائحة الحالات التي تُعد الحيازةُ الوسيلة الوحيدة لنفاذ حق الضمان في مواجهة الغير.
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 8 explained in plain English
The Law distinguishes between the validity of a security right between its parties and its effectiveness against third parties, that is, whether it can be asserted against persons outside the contract, such as the grantor's other creditors or purchasers of the collateral. This article sets out the two ways of making it effective:
- Registration: which according to the definition in Article 1 is entering the security right and anything that changes it in the unified Registry of rights over movable assets.
- Transfer of possession: possession of the collateral passes to the secured party, whether directly or indirectly, and actually or constructively. Actual possession is where the secured party really receives the collateral, while constructive possession is possession the Law treats as existing without physical receipt.
Either of the two ways is enough to achieve effectiveness under paragraph (1).
The exception: paragraph (2) provides that the Implementing Regulations set the cases where possession is the only means of making a security right effective against third parties, so registration is not enough in them. The article does not state these cases, so the Implementing Regulations must be consulted.
Why does effectiveness matter? Because a secured party who has not achieved effectiveness may have a valid right against the grantor but cannot assert it against third parties. Article 9, which follows, allows the method of effectiveness to be replaced without it lapsing. To protect your right as a creditor, it is advisable to consult a lawyer specialized in commercial and finance matters.
Practical example
A financing company in Jeddah gave financing to an establishment in return for security over its cars, and the cars remained in the establishment's hands. To make the security right effective against the establishment's other creditors, the company registers it in the unified Registry, because possession did not pass to it.
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 8 of the Saudi Law on Security Rights in Movable Assets
How does a security right become effective against third parties?
By registration in the Registry, or by transfer of possession of the collateral to the secured party, directly or indirectly, actually or constructively.
Is registration always enough to make a security right effective?
No. The Implementing Regulations set the cases where possession is the only means of making a security right effective against third parties.
Must the creditor actually receive the collateral?
No. Registration is enough, and transfer of possession may also be constructive or indirect, subject to the cases set by the Implementing Regulations.
More articles on Effectiveness of a Security Right Against Third Parties
- 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 10
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.
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-
- 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.