Liquidation and administrative liquidation are often confused, although they differ substantially in cause, governing law, and procedure. Company liquidation is governed by the Companies Law and its Implementing Regulations, which establish two routes: voluntary and judicial liquidation. Partners may agree to liquidate a company amicably; if they do not agree, a partner may bring a judicial liquidation claim when persuasive grounds for liquidation exist.
A court orders liquidation on the basis that the company's assets are sufficient to pay its debts. This is the dividing criterion between liquidation and administrative liquidation. Liquidation means that the company has the financial solvency needed to wind up and pay its debts. If its assets or solvency are insufficient, the liquidation request is rejected and the matter proceeds to administrative liquidation under the Bankruptcy Law.
Administrative liquidation is one of the bankruptcy procedures provided by law. Where assets or solvency are insufficient, the partners or another party with interest and standing may apply to the competent Commercial Court for the company's administrative liquidation. If the application is approved, bankruptcy procedures begin in accordance with the Law.
A judicial principle is a general substantive or procedural rule established by the Supreme Court and taken into account when cases are heard and judgments and decisions are issued. N A A: (2/A), (29/8/1434 AH).
