Article 42 of the Saudi Implementing Regulations of the Bankruptcy Law
المادة 42 من اللائحة التنفيذية لنظام الإفلاس · الفصل الرابع: إجراء إعادة التنظيم المالي
This article exempts the debtor, its owners, managers and auditor from the Companies Law provisions on reaching the specified loss level if the financial reorganization request is registered in time.
Official text (Arabic)
This article has not been amended since the law was issued.
يعفى المدين أو المالك أو المدير أو المسؤول أو عضو مجلس الإدارة أو مراجع الحسابات, من تطبيق أحكام نظام الشركات فيما يخص بلوغ خسائر المدين النسبة المحددة في نظام الشركات، وذلك إذا قيد طلب افتتاح إجراء إعادة التنظيم المالي قبل انتهاء المدة المحددة في ذلك النظام، ما لم تقضِ المحكمة برفض افتتاح الإجراء أو إنهائه.
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 42 explained in plain English
The Companies Law contains provisions that apply if a company's losses reach a certain level set by that Law. This article of the Implementing Regulations of the Bankruptcy Law provides an exemption from those provisions in a specific case.
Who the exemption covers: The debtor, an owner, a manager, an officer, a board member, or an auditor.
Condition of the exemption: That the request to open the financial reorganization procedure is registered before the end of the period specified in the Companies Law.
When the exemption ends: If the court rules to reject opening the procedure, or rules to terminate it.
The article does not state the level, the length of the period or the content of the Companies Law provisions, but refers to them as they appear in that Law. The idea is that a company that turns to financial reorganization in good time is not subject to the loss provisions of the Companies Law while the procedure is in place, so that it can address its situation through the bankruptcy procedure.
This article sits within the provisions on the financial reorganization procedure in the Regulations, and is followed by Article 43 on a request to recover assets from the debtor's possession.
Because timing is decisive here, managers and board members are advised to consult a lawyer who specializes in bankruptcy and commercial cases when losses grow.
Practical example
A joint stock company in Riyadh whose losses reached the level set in the Companies Law. Its board registered the request to open the financial reorganization procedure before the end of the period specified in that Law, so the board and the auditor are exempt from applying those provisions, unless the court rejects opening the procedure or rules to terminate it.
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 42 of the Saudi Implementing Regulations of the Bankruptcy Law
Are board members exempt from the Companies Law loss provisions when financial reorganization is requested?
Yes, if the request to open the procedure is registered before the end of the period specified in the Companies Law, unless the court rejects opening or terminates the procedure.
Who does the exemption cover?
The debtor, an owner, a manager, an officer, a board member and an auditor.
When does the exemption fall away?
If the court rules to reject opening the procedure or to terminate it.
More articles on Financial Reorganization
- 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 sets out when the court approves putting a proposal to amend the plan to creditors and owners for a vote, including a material circumstance, a request within 14 days, and the possible 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 43
This article allows someone who owns assets in the debtor's possession or held by it to ask the court to recover them, with the specified information and documents.
يقدم من يملك أصولاً تقع في حيازة المدين أو محجوزة لديه، طلباً إلى المحكمة لاستردادها، مرافقة له المعلومات والوثائق المحددة لذلك.
- Article 44
This article requires the trustee to allow a creditor to inspect the list of claims approved by the court.
على الأمين تمكين الدائن من الاطلاع على قائمة المطالبات التي تعتمدها المحكمة.
- Article 45
This article requires the trustee to attach a report on the proposal when filing it, and the debtor to notify affected creditors and owners of the voting date once the trustee approves.
1 - على الأمين أن يرفق -عند إيداع المقترح لدى المحكمة- تقريره المتضمن رأيه في إمكان موافقة الدائنين على المقترح, وقابليته للتنفيذ. 2 - على المدين -بعد موافقة ال
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.