Article 107 of the Saudi Bankruptcy Law

المادة 107 من نظام الإفلاس · الفصل الخامس: إجراء التصفية: بيع الأصول

The article bars the creditor, debtor, owner, their relatives, the debtor's partners and employees, and the trustee and its relatives from bidding to buy bankruptcy estate assets except at a public auction.

Official text (Arabic)

This article has not been amended since the law was issued.

لا يحق لأي من هؤلاء -أصالة أو وكالة- تقديم عرض شراء أي من أصول التفليسة المعروضة للبيع إلا عند عرضها في مزاد علني:

أ- الدائن.

ب- المدين أو المالك أو زوج أي منهما أو صهره أو قريبه حتى الدرجة الرابعة.

ج- شريك المدين أو أحد العاملين لديه أو مراجع حساباته أو وكيله خلال السنتين السابقتين لافتتاح الإجراء.

د- الأمين أو قريبه حتى الدرجة الرابعة.

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 107 explained in plain English

This article deals with conflicts of interest in selling bankruptcy estate assets. It bars certain categories from making a purchase offer, whether personally or through an agent, except when the asset is offered at a public auction.

The barred categories:

A creditor.
The debtor or owner, or the spouse of either, their in-law, or their relative up to the fourth degree.
A partner of the debtor, or one of its employees, its auditor or its agent, during the two years preceding the opening of the procedure.
The trustee or its relative up to the fourth degree.

The reasoning is that these persons may have information or connections that let them buy at less than the true value at the creditors' expense. A public auction allows open competition, which is why the law allows them to take part in it.

Note that the bar covers an offer made "in person or through an agent", so it cannot be evaded by making the offer in the name of another person acting on their behalf.

This article comes after Article 106 on selling an asset worth more than a quarter of the assets, and before Article 108, which governs the trustee's calling of the creditors to vote. To assess a particular situation, consult a lawyer specializing in bankruptcy and commercial cases.

Practical example

A cousin of the owner of a company in liquidation in Riyadh wants to buy one of its warehouses. He may not make a purchase offer, personally or through an agent, unless the warehouse is offered at a public auction, because he is a relative of the owner within the fourth degree.

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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