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Dubai – The new Saudi bankruptcy system would be launched end of August according to a senior official.

Majid Al Rasheed, secretary of the Saudi bankruptcy committee at the Ministry of Trade and Investment, said: "The new system will provide better solutions to troubled companies." He was speaking in an interview with Saudi newspaper Al Iqtesadiya.

"There is no doubt that there are companies, not at their best because of their financial situation. They need to take advantage of the new bankruptcy system," he said.

He explained that the new system will enhance the confidence of local and foreign investors and will boost Saudi Arabia rankings in global economic indicators especially insolvency reports.

The new law was approved by the Saudi cabinet in February. Modern bankruptcy legislation does not currently exist in Saudi Arabia, creating difficulties for struggling companies seeking to restructure debt with creditors.

The new law which is awaited by many will also offer protection to creditors such as banks, as well as troubled companies that seek to wind up their affairs in an orderly manner, thereby shielding themselves from arbitrary seizure of their assets.

Saudi Arabia is embarking on an intensive drive to overhaul its economy - including updating outdated laws - as it seeks to create an investor-friendly climate.

Last week the government published a draft law covering partnerships between the government and private sector.

The law exempts investors from labour laws, real state ownership restrictions and other regulations, in a step towards launching billions of dollars’ worth of infrastructure projects and attracting fresh foreign investment.