Article 36 of the Saudi Implementing Regulations of the Bankruptcy Law
المادة 36 من اللائحة التنفيذية لنظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية: تأشير الأمين على المقترح
This article of the Regulations explains that exercising due diligence to perform the debtor's contractual obligations arising after the protective settlement opens includes providing a guarantee from the debtor or from a third party.
Official text (Arabic)
This article has not been amended since the law was issued.
يشمل بذل العناية الواجبة لوفاء المدين بالتزاماته التعاقدية التي تنشأ بعد افتتاح إجراء التسوية الوقائية -وفقاً لحكم الفقرة (3) من المادة (الرابعة والعشرين) من النظام- ما يأتي:
أ - تقديم ضمان من المدين دون إخلال بأحكام التمويل المضمون المنصوص عليها في النظام.
ب - تقديم ضمان من 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 36 explained in plain English
The debtor may continue its activity during the protective settlement procedure, making new contracts and incurring obligations after the procedure opens. This article of the Implementing Regulations of the Bankruptcy Law refers to the provision of paragraph (3) of Article 24 of the Law on exercising due diligence to perform the debtor's obligations, and explains what that includes.
According to the article, exercising due diligence to perform the debtor's contractual obligations arising after the procedure opens includes:
- providing a guarantee from the debtor itself, provided this does not prejudice the provisions on secured financing set out in the Bankruptcy Law;
- providing a guarantee from a third party, that is, from a person other than the debtor.
The word "includes" means that these two forms fall within the meaning of due diligence, and the article does not detail the type or amount of the guarantee. The restriction that the provisions on secured financing not be prejudiced also means that the guarantee the debtor provides may not conflict with what the Law provides concerning that financing.
This provision matters to those dealing with a debtor in a protective settlement, such as suppliers and service providers, because it clarifies the means of reassuring them that new contracts will be performed. It is followed by Article 37, which regulates the debtor's request to terminate contracts. To assess the appropriate guarantee in a particular contract, a lawyer specializing in bankruptcy and commercial cases can be consulted.
Practical example
An industrial company in Riyadh in a protective settlement procedure needs to buy raw materials from a new supplier. To reassure the supplier that the price under the contract made after the opening will be paid, the company provided a guarantee from one of its owners as a third party, which is one of the forms of due diligence the article mentions.
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 36 of the Saudi Implementing Regulations of the Bankruptcy Law
What is meant by due diligence to perform obligations after a protective settlement?
According to the article, it includes providing a guarantee from the debtor or a guarantee from a third party to perform the contractual obligations arising after the opening.
May the debtor provide a guarantee from its assets?
Yes. The article mentions providing a guarantee from the debtor, provided the provisions on secured financing in the Law are not prejudiced.
Does the article cover obligations before the opening?
The article speaks of the contractual obligations that arise after the protective settlement procedure opens.
More articles on Protective Settlement
- Article 16
This article of the Regulations specifies the details the proposal must include, as the case may be, such as the debtor's financial position, assets and debts, the proposed settlement, classification of creditors and the plan's timetable.
يجب أن يتضمن المقترح -بحسب الأحوال- ما يأتي: أ - معلومات عن المدين ونشاطه. ب- بيان الوضع المالي للمدين وتأثيرات الوضع الاقتصادي عليه. ج - تحديد أصول المدين وتقد
- Article 17
The meeting management rules apply to managing the vote on the proposal, the debtor or trustee prepares minutes of the voting meeting with specified details, then deposits the voting result with the court.
1- تسري قواعد إدارة الاجتماعات على إدارة عملية التصويت على المقترح. 2- يعد المدين أو الأمين -بحسب الإجراء- محضراً لاجتماع الدائنين للتصويت على المقترح، يقيد فيه
- Article 31
This article of the Regulations sets the cases in which the court agrees to put a proposal to amend the plan to creditors and owners for a vote, and allows a stay of claims.
1 - توافق المحكمة -بناءً على طلب المدين أو الأمين بحسب الإجراء- على تقديم مقترح لتعديل الخطة للدائنين والملاك وتحدد موعداً للتصويت عليه، وذلك في أي من الحالات ا
- Article 32
This article of the Regulations requires that the proposal for a protective settlement be endorsed by a trustee on the list of trustees as meeting the required information and documents.
يجب أن يكون المقترح المرافق لطلب افتتاح إجراء التسوية الوقائية مؤشراً عليه من أمين مدرج في قائمة الأمناء باستيفائه المعلومات والوثائق المطلوبة.
- Article 33
This article of the Regulations requires the debtor to notify creditors of the opening of the protective settlement within 7 days and gives an omitted creditor 14 days to request inclusion of its claim.
1- على المدين تبليغ الدائنين المحددين في المقترح بحكم المحكمة بافتتاح إجراء التسوية الوقائية خلال (سبعة) أيام من تاريخ صدوره، ودعوتهم إلى التصويت على المقترح، ع
- Article 34
This article of the Regulations requires the debtor to lodge the court's decision approving or extending a stay of claims with the Bankruptcy Register immediately upon its issue.
على المدين أن يودع لدى سجل الإفلاس قرار المحكمة بالموافقة على طلب تعليق المطالبات أو تمديده فور صدوره.
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.