Article 111 of the Saudi Bankruptcy Law

المادة 111 من نظام الإفلاس · الفصل الخامس: إجراء التصفية: حقوق التصويت

The article requires a creditor to deduct what the debtor's guarantor or another person paid from its claim filed with the trustee, and allows the guarantor or other person to file a claim for what it paid.

Official text (Arabic)

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

إذا أوفى ضامن دين المدين أو غيره بجزء من الدين للدائن قبل افتتاح إجراء التصفية أو بعده وجب على الدائن خصم ما حصل عليه من مطالبته التي يقدمها إلى الأمين. ولكل ضامن أو غيره تقديم مطالبة إلى الأمين بالمبلغ الذي أداه.

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 111 explained in plain English

This article deals with the case of partial payment of the debtor's debt by another person, such as a guarantor or anyone else.

The first provision, on the creditor: If the guarantor of the debtor's debt or another person pays part of the debt to the creditor, whether before or after the liquidation procedure is opened, the creditor must deduct what it received from the claim it files with the trustee.

The second provision, for the guarantor or another person: Every guarantor or other person who paid part of the debt may file a claim with the trustee for the amount it paid.

The two provisions have two aims: that the creditor not receive more than its due by claiming the full amount from the estate after receiving part of it, and that whoever paid part of the debt can file a claim for what it paid.

The article does not determine the rank of the guarantor's claim among the other claims, but only establishes its right to file it.

This article comes after Article 110, which deducts what the debtor paid during the financial restructuring from the creditor's claim when it turns into liquidation, and before Article 112 on late claims. To assess a particular situation, consult a lawyer specializing in bankruptcy and commercial cases.

Practical example

A bank is owed SAR 500,000 by a company, which was guaranteed by its partner Saad. Saad paid the bank SAR 150,000, and then the company's liquidation was opened. The bank files its claim with the trustee for only SAR 350,000, and Saad may file a separate claim for the SAR 150,000 he paid.

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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