Article 37 of the Saudi Implementing Regulations of the Bankruptcy Law
المادة 37 من اللائحة التنفيذية لنظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية: تأشير الأمين على المقترح
This article of the Regulations regulates the debtor's request to terminate its contracts together with the request to open the protective settlement, with a report from a trustee on the list, and notice to the counterparty of the hearing and decision.
Official text (Arabic)
This article has not been amended since the law was issued.
1 - على المدين -الذي يرغب في إنهاء أي من العقود التي يكون طرفاً فيها- تقديم طلب الإنهاء إلى المحكمة مع طلب افتتاح إجراء التسوية الوقائية، على أن يرفق به تقريراً من أمين مدرج في قائمة الأمناء يبين أن الإنهاء ضروري لحماية نشاط المدين، ويحقق مصلحة أغلبية الدائنين، ولا يرتب ضرراً بالغاً على المتعاقد.
2- على المدين أن يبلغ المتعاقد بموعد جلسة نظر المحكمة لطب الإنهاء قبل (خمسة) أيام على الأقل من موعدها، وبقرار المحكمة بالإنهاء خلال (خمسة) أيام من تاريخ صدوره إذا لم يحضر المتعاقد الجلسة.
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 37 explained in plain English
This article of the Implementing Regulations of the Bankruptcy Law allows a debtor who wishes to terminate any of the contracts to which it is a party to request this from the court, but on specified conditions:
- Timing: the termination request is submitted to the court together with the request to open the protective settlement procedure.
- The report: the request is accompanied by a report from a trustee on the list of trustees stating three things together: that termination is necessary to protect the debtor's activity, that it serves the interest of the majority of creditors, and that it does not cause grave harm to the counterparty.
The article also imposes two duties of notification on the debtor to protect the other party:
- to notify the counterparty of the date of the court hearing on the termination request at least 5 days before the hearing;
- to notify it of the court's termination decision within 5 days of its issue, if the counterparty did not attend the hearing.
Termination is therefore not by the debtor's will alone but by a court decision after a reasoned request and a trustee's report, giving the counterparty the opportunity to know of the hearing. This article comes after Article 36 on due diligence to perform contractual obligations arising after the opening, and is followed by Article 38 on amending the proposal.
If you are a counterparty to a debtor who has requested termination of your contract, it is best to consult a lawyer specializing in bankruptcy and commercial cases before the hearing date.
Practical example
A restaurant company in Jeddah rents a loss-making branch under a long contract and decides to request a protective settlement. With the opening request it submits a request to terminate the lease, attaching the report of a trustee on the list showing that termination is necessary to protect its activity, serves the interest of the majority of creditors and does not cause grave harm to the lessor, and then notifies the lessor of the hearing date at least 5 days before.
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 37 of the Saudi Implementing Regulations of the Bankruptcy Law
Can the debtor terminate its contracts in a protective settlement?
It may request this from the court together with the request to open the procedure, provided it attaches a report from a trustee on the list of trustees.
What must the trustee's report show?
That termination is necessary to protect the debtor's activity, serves the interest of the majority of creditors, and does not cause grave harm to the counterparty.
When is the counterparty notified of the hearing on the termination request?
At least 5 days before the hearing date, and it is notified of the decision within 5 days of its issue if it did not attend.
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.