Article 116 of the Saudi Bankruptcy Law

المادة 116 من نظام الإفلاس · الفصل الخامس: إجراء التصفية: التوزيع على الدائنين

The article governs the trustee's decision to distribute the proceeds of selling the estate assets to creditors, notice of it, objecting to it, and reserving amounts for debts in court dispute.

Official text (Arabic)

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

1- يصدر الأمين قراراً بتوزيع حصيلة بيع أصول التفليسة على الدائنين وفقاً لما تحدده اللائحة، ويتولى الأمين توزيع هذه الحصيلة على الدائنين مرة واحدة وفقاً لترتيب الأولوية، واستثناء من ذلك يجوز بموافقة المحكمة إجراء أكثر من توزيع لحصيلة بيع أصول التفليسة إذا دعت الحاجة لذلك.

2- يبلغ الأمين كل دائن معلوم لديه بقرار التوزيع ويسلمه نسخة منه قبل (ثلاثين) يوماً على الأقل من تاريخ إجراء التوزيع. وللدائن الاعتراض أمام المحكمة على قرار التوزيع أو إجراءاته خلال (واحد وعشرين) يوماً من تاريخ التبليغ، على أن يبلغ الأمين باعتراضه أمام المحكمة ويزوده بوثائق الاعتراض، ويجب على الأمين التوقف عن التوزيع إلى حين الفصل في الاعتراض.

3- تنظر المحكمة في الاعتراض المقدم من الدائن، وتصدر حكمها بشأنه وبشأن استكمال إجراءات التوزيع خلال (عشرين) يوماً من تقديمه.

4- لا يلزم حصول الأمين على موافقة المحكمة لإصدار قرار التوزيع.

5- على الأمين الاحتفاظ بمبلغ يتناسب مع مقدار الديون التي تكون محلاً لنزاع قضائي.

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 116 explained in plain English

This article governs the stage of distributing the liquidation proceeds to the creditors.

1- The distribution decision: The trustee issues a distribution decision as the Implementing Regulations specify, and distributes the proceeds once in the order of priority. As an exception, with the court's approval, more than one distribution may be made if needed. The trustee does not need the court's approval to issue the distribution decision itself.

2- Notice: The trustee notifies each creditor known to it of the decision and gives it a copy at least 30 days before the date of distribution.

3- Objection:

A creditor may object before the court to the distribution decision or its procedures within 21 days of the date of notice.
It must notify the trustee of its objection and give it its documents.
The trustee must stop distributing until the objection is decided.
The court issues its judgment on the objection and on completing the distribution within 20 days of its filing.

4- Disputed debts: The trustee must reserve an amount proportionate to the debts that are the subject of a court dispute.

The article does not set out the order of priority itself, but refers the details to the Implementing Regulations. It is followed by Article 117, which governs the position of someone who files a claim when there are several distribution decisions. To assess a particular situation, consult a lawyer specializing in bankruptcy and commercial cases.

Practical example

A supplier in Jeddah received a copy of the decision to distribute the liquidation proceeds of its customer 30 days before the date of distribution, and noticed that its claim had been placed in a rank it considers wrong. It objected before the court within 21 days of being notified and notified the trustee of the objection and its documents, so the trustee stopped distributing until the court decides the objection.

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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