DUBAI/KHOBAR, Saudi Arabia (Reuters) - Saudi Arabia’s cabinet has approved a bankruptcy law, sources familiar with the matter said on Sunday, giving a boost to efforts to make the kingdom more enticing to investors.

FILE PHOTO - Saudi Arabia's King Salman attends a meeting with Russian President Vladimir Putin (not in the picture) in the Kremlin in Moscow, Russia October 5, 2017. REUTERS/Yuri Kadobnov/Pool

Modern bankruptcy legislation does not currently exist in Saudi Arabia, creating difficulties for struggling companies seeking to restructure debt with creditors since the 2009 global financial crisis and, more recently, the dip in oil prices.

The kingdom is embarking on an intensive drive to overhaul its economy - including updating outdated laws - as it seeks to create an investor-friendly climate to push through a multi-billion dollar pipeline of asset sales such as the initial public offering of Saudi Aramco, expected to be the world’s largest public share sale.

“The timing is excellent,” said Bader al-Busaies, managing partner at Al Suwaiket and Al Busaies law firm.

“Lots of companies are facing financial difficulties. Before it was either liquidation or stakeholders had to inject money. The new law is an alternative solution - the international practice has proven that insolvency law offers a good solution for companies.”

King Salman endorsed the bankruptcy law after the cabinet approved it, the sources said, citing a document dated last week.

The Ministry of Commerce and Investment did not immediately respond to a request for comment, and it was not clear when the law would be promulgated and take effect.

Saudi Arabia’s Shura Council, a top advisory body to the government, in December approved a draft of the law which consisted of 231 articles in 17 chapters. It regulated bankruptcy procedures such as settlements and liquidation, for individuals as well as local and foreign companies, according to a government statement at the time.

No details of the framework of the law have yet been released but an earlier draft version created a provision whereby approval of a debt restructuring deal could be achieved if at least two-thirds of creditors approved the plan.

That might help to resolve existing distressed debt disputes such as one faced by Ahmad Hamad Algosaibi and Brothers (AHAB), a local conglomerate which currently has two-thirds of creditors’ support for its debt proposal.

AHAB and another company, Saad Group, defaulted in 2009 in Saudi Arabia’s biggest financial meltdown, leaving international and regional banks and other creditors owed about $22 billion.