Article 120 of the Saudi Bankruptcy Law
المادة 120 من نظام الإفلاس · الفصل الخامس: إجراء التصفية: مسؤولية الملاك
The article requires the trustee to respect the limits of the owners' liability, and makes jointly liable owners responsible for covering any shortfall in the estate assets, with the trustee able to seek a court order compelling them.
Official text (Arabic)
This article has not been amended since the law was issued.
1- يراعي الأمين عند تصفية أصول التفليسة حدود مسؤولية الملاك وفقاً لأحكام الأنظمة ذات العلاقة.
2- يكون الملاك المتضامنون مسؤولين عن تغطية ما ينقص من أصول التفليسة إذا لم تكف حصيلة بيعها للوفاء بديون التفليسة، ويطلب الأمين منهم كتابة الوفاء بديون التفليسة في الموعد الذي يحدده، ويضاف ما يدفعون من أموال إلى أصول التفليسة. وفي حال تخلفهم عن السداد، فعلى الأمين أن يتقدم إلى المحكمة بطلب إلزامهم بالسداد.
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 120 explained in plain English
This article deals with the liability of the debtor's owners, such as the partners in a company, for the bankruptcy estate's debts.
1- The general rule: In liquidating the bankruptcy estate assets, the trustee respects the limits of the owners' liability under the provisions of the relevant laws. The extent of an owner's liability for the debtor's debts is therefore determined by those laws, not by this article alone.
2- Jointly liable owners:
- They are responsible for covering any shortfall in the bankruptcy estate assets if the proceeds of selling them are not enough to pay the estate's debts.
- The trustee asks them in writing to pay the estate's debts by the date it sets.
- What they pay is added to the bankruptcy estate assets, and so enters the distribution to creditors.
- If they fail to pay, the trustee must apply to the court for an order compelling them to pay.
The practical meaning is that a jointly liable owner's liability does not stop at its share in the debtor, but it can be asked to make up the shortfall in the bankruptcy estate assets. As for owners who are not jointly liable, the limits of their liability as set by the relevant laws are respected.
After this article comes Article 121, which requires the trustee to ask to end the liquidation procedure when the sale of assets, the lawsuits and the final distribution are complete, and requires that a request to end the liquidation of a debtor with legal personality include a request to dissolve it. To assess a particular situation, consult a lawyer specializing in bankruptcy and commercial cases.
Practical example
The liquidation procedure was opened for a general partnership in Riyadh between two partners, and the proceeds of selling its assets were not enough to pay its debts. The trustee asked the partners in writing to pay the shortfall by a date it set. When one of them failed to pay, the trustee applied to the court for an order compelling him to pay, and added what the other partner paid to the bankruptcy estate assets.
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 120 of the Saudi Bankruptcy Law
Is a jointly liable partner responsible for the bankrupt company's debts?
Yes. Jointly liable owners are responsible for covering any shortfall in the bankruptcy estate assets if the proceeds of selling them are not enough to pay its debts.
What happens if a jointly liable partner does not pay?
The trustee must apply to the court for an order compelling it to pay.
What are the limits of the liability of owners who are not jointly liable?
The trustee respects the limits of the owners' liability under the provisions of the relevant laws.
More articles on Liquidation of the Debtor's Assets
- Article 7
Article 7 bars the liquidation of any person under another law unless its assets cover all its debts and it is not defaulting, and makes management members jointly liable if this is violated.
1- مع مراعاة ما ورد في المادة (الرابعة) من النظام، لا يصفى أي شخص بموجب نظام آخر إلا إذا كانت أصوله تكفي لسداد جميع ديونه وكان غير متعثر. 2- إذا تم حل المدين وت
- Article 69
The debtor continues to manage its business during financial reorganization under the trustee's supervision, and at the trustee's request the court may remove its control in cases of negligence, mismanagement or criminal acts.
1- دون إخلال بصلاحيات ومهمات الأمين، يستمر المدين في إدارة أعماله ونشاطه خلال فترة إجراء إعادة التنظيم المالي تحت إشراف الأمين. 2- إذا ارتكب المدين أو أحد المسؤ
- Article 90
The court opens liquidation or administrative liquidation after financial restructuring ends if the debtor is distressed or bankrupt, the procedure's conditions are met, and the ending was for specified grounds.
تقضي المحكمة -من تلقاء نفسها أو بناء على طلب من ذي مصلحة- بافتتاح إجراء التصفية أو التصفية الإدارية إذا تحققت الشروط الآتية: أ - أن يكون المدين متعثراً أو مفلسا
- Article 92
The article allows the debtor, a creditor or the competent authority to ask the court to open the liquidation procedure if the debtor is distressed or bankrupt.
دون الإخلال بأحكام الأنظمة ذات العلاقة، للمدين أو الدائن أو الجهة المختصة التقدم إلى المحكمة بطلب افتتاح إجراء التصفية للمدين إذا كان المدين متعثراً أو مفلساً.
- Article 93
The article requires that a liquidation request be accompanied by the information and documents the Implementing Regulations specify to be registered, and sets special conditions where one or more creditors file it.
1- يشترط لقيد طلب افتتاح إجراء التصفية لدى المحكمة أن يقدم الطلب مرافقاً له المعلومات والوثائق ذات العلاقة، وفقاً لما تحدده اللائحة. 2- لا يقيد طلب دائن أو أكثر
- Article 94
A creditor's request to open liquidation is not registered if the debtor disputed the debt before the request, and filing it despite proof of the dispute is an abuse of the procedure.
لا يقيد طلب الدائن بافتتاح إجراء التصفية إذا كان المدين قد نازع الدائن في الدين قبل تقدم الدائن بالطلب. ويعد طلب الدائن افتتاح الإجراء مع وجود ما يثبت منازعة 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.