Article 128 of the Saudi Bankruptcy Law
المادة 128 من نظام الإفلاس · الفصل السادس: إجراء التسوية الوقائية لصغار المدينين: الهدف
The article lets a small debtor choose the ordinary protective settlement, and bars it from opening a small debtors' settlement if it was subject to it or to a protective settlement in the preceding 12 months.
Official text (Arabic)
This article has not been amended since the law was issued.
1- للمدين الصغير طلب افتتاح إجراء التسوية الوقائية بدلاً من افتتاح إجراء التسوية الوقائية لصغار المدينين.
2- لا يجوز للمدين افتتاح إجراء التسوية الوقائية لصغار المدينين إذا كان سبق له الخضوع إلى هذا الإجراء أو إلى إجراء التسوية الوقائية خلال (الاثني عشر) شهراً السابقة.
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 128 explained in plain English
This article contains two provisions on choosing the procedure and repeating it:
1- Freedom of choice: A small debtor is not obliged to use the protective settlement procedure for small debtors, but may ask to open the protective settlement procedure (the ordinary procedure) instead. The small debtors' procedure is an option available to it, not the only route.
2- A time limit on repetition: A debtor may not open the protective settlement procedure for small debtors if it was previously subject to:
- this same procedure, or
- the protective settlement procedure,
within the preceding 12 months.
Note that the restriction in paragraph (2) concerns opening the small debtors' procedure, and the text does not address here the ruling on asking for the ordinary protective settlement after a previous subjection.
This article is consistent with Article 127, which explains that the aim of the procedure is to enable the small debtor to settle its debts through simple, low-cost procedures while keeping management of its business, and with Article 129, which allows it to issue a decision opening the procedure if it expects financial disturbances that it fears will make it distressed, or if it is distressed or bankrupt. To assess a particular situation, consult a lawyer specializing in bankruptcy and commercial cases.
Practical example
A small contracting establishment in Abha was subject to the protective settlement procedure for small debtors 8 months ago, and then faced new difficulties. It may not open the same procedure again before 12 months have passed since its previous subjection.
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 128 of the Saudi Bankruptcy Law
Must a small business use only the small debtors' procedure?
No. A small debtor may ask to open the protective settlement procedure instead of the protective settlement procedure for small debtors.
Can the protective settlement for small debtors be repeated?
It may not be opened if the debtor was previously subject to it or to the protective settlement procedure within the preceding 12 months.
More articles on Small Debtor Bankruptcy Procedures
- Article 102
Opening the liquidation leads to the start of liquidating the bankruptcy estate assets, carried out by the trustee, except what the court approves an individual debtor keeping for the living of the debtor and dependents.
1- يترتب على افتتاح إجراء التصفية البدء في تصفية أصول التفليسة. 2- يتولى الأمين تصفية أصول التفليسة عدا ما وافقت المحكمة على احتفاظ المدين ذي الصفة الطبيعية به
- Article 127
The article states that the aim of the protective settlement for small debtors is to let a small debtor agree with its creditors on settling its debts through simple, low-cost procedures while it keeps managing its business.
يهدف إجراء التسوية الوقائية لصغار المدينين إلى تمكين المدين الصغير من التوصل إلى اتفاق مع دائنيه لتسوية ديونه خلال فترة معقولة عبر إجراءات يسيرة بتكلفة منخفضة و
- Article 129
The article allows a small debtor that is distressed, bankrupt or expecting distress to issue a decision opening the small debtors' protective settlement and file it with its proposal in the bankruptcy register.
1- للمدين الصغير إذا كان يتوقع مواجهة اضطرابات مالية يخشى معها تعثره أو كان متعثراً أو مفلساً، أن يصدر قراراً بافتتاح إجراء التسوية الوقائية لصغار المدينين وفق
- Article 130
The article requires a small debtor to call the owners to vote on the proposal if it affects their rights, at least 21 days before the voting date and before the creditors vote.
إذا تضمن المقترح ما يؤثر في حقوق الملاك، فعلى المدين الصغير دعوتهم إلى التصويت على المقترح قبل حلول موعد التصويت بـ(واحد وعشرين) يوماً على الأقل وفقاً لما تنص ع
- Article 131
The article lets a small debtor ask the court to suspend claims for no more than 90 days, and explains when that period ends.
1- للمدين الصغير أن يطلب من المحكمة -خلال المدة من افتتاح إجراء التسوية الوقائية لصغار المدينين إلى موافقة الدائنين على المقترح- تعليق المطالبات لمدة لا تزيد عل
- Article 132
The article governs the form of the request to suspend claims and its attachments, and allows the court to ask for supporting documents, including a statement that creditor approval is likely.
1- يُقدم طلب تعليق المطالبات إلى المحكمة وفق النموذج الذي تصدره لجنة الإفلاس، على أن يرفق به نبذة عن مضمون المقترح وما تحدده اللائحة. 2- للمحكمة أن تطلب من المد
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.