Article 13 of the Saudi Bankruptcy Law
المادة 13 من نظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية طلب افتتاح إجراء التسوية الوقائية
Article 13 allows a debtor at risk of default, defaulting or bankrupt to request the opening of protective settlement, and bars it if it underwent the procedure in the previous twelve months.
Official text (Arabic)
This article has not been amended since the law was issued.
1- دون الإخلال بأحكام الأنظمة ذات العلاقة، للمدين التقدم إلى المحكمة بطلب افتتاح إجراء التسوية الوقائية في أي من الحالات الآتية:
أ- إذا كان من المرجح أن يعاني من اضطرابات مالية يخشى معها تعثره.
ب- إذا كان متعثراً.
ج- إذا كان مفلساً.
2- لا يجوز للمدين التقدم بطلب افتتاح إجراء التسوية الوقائية إذا كان سبق له الخضوع إلى هذا الإجراء أو إلى إجراء التسوية الوقائية لصغار المدينين خلال (الاثني عشر) شهراً السابقة لطلب افتتاح الإجراء.
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 13 explained in plain English
This article specifies when a debtor is entitled to request protective settlement.
Who submits the request? The debtor itself, and it submits it to the court, without prejudice to the provisions of the relevant laws.
The cases in which the request is permitted (any one of them is enough):
- That it is likely to suffer financial disruptions that make it feared to default, that is, before it has actually defaulted.
- That it is defaulting.
- That it is bankrupt.
The time restriction: a debtor may not submit the request if it has previously undergone the protective settlement procedure or the protective settlement procedure for small debtors within the twelve months preceding the request to open the procedure. The purpose is to prevent the procedure from being repeated in quick succession.
The first case shows that the Law encourages the debtor to act early, before its crisis worsens. Article 14 explains how the request is registered and what must accompany it by way of a proposal, information and documents.
To assess whether these cases apply and whether the procedure suits an establishment's position, it is advisable to consult a lawyer specialized in commercial and bankruptcy cases.
Practical example
A food factory in Qassim lost a major contract and expects that it will not be able to pay its suppliers' installments in the coming months, although it has not been late on any payment so far. It may request the opening of protective settlement because it is likely to suffer financial disruptions that make it feared to default, unless it has undergone this procedure within the previous twelve months.
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 13 of the Saudi Bankruptcy Law
Must a company be defaulting to request protective settlement?
No. The request is also permitted if the debtor is likely to suffer financial disruptions that make it feared to default, as well as for a defaulting or bankrupt debtor.
Can protective settlement be requested a second time?
Not if the debtor has undergone the protective settlement procedure or the protective settlement procedure for small debtors within the twelve months preceding the request.
Who submits the protective settlement request?
The debtor submits it to the court.
More articles on Protective Settlement
- Article 14
Article 14 requires the protective settlement request to be accompanied by the proposal, information and documents, and the proposal to include the debtor's financial position and a classification of creditors into classes.
1- يقيد طلب افتتاح إجراء التسوية الوقائية لدى المحكمة بعد تقديمه مرافقاً له المقترح والمعلومات والوثائق ذات العلاقة، وفقاً لما تحدده اللائحة. 2- يجب أن يتضمن ال
- Article 15
Article 15 governs how the court hears a protective settlement application within 40 days, and when it opens the procedure, rejects the application, or adjourns the hearing for up to 21 days.
1- تحدد المحكمة موعداً للنظر في طلب افتتاح إجراء التسوية الوقائية على أن يكون الموعد خلال مدة لا تزيد على (أربعين) يوماً من تاريخ قيد الطلب، وتبلغ المحكمة المدي
- Article 16
Article 16 requires the ruling opening a protective settlement to set a creditors' vote within 40 days, extendable by another 40 days, and requires the debtor to announce the opening within 7 days.
1- تحدد المحكمة في حكمها الصادر بافتتاح إجراء التسوية الوقائية موعداً لتصويت الدائنين على المقترح، على أن يكون الموعد خلال مدة لا تزيد على (أربعين) يوماً من تار
- Article 17
Article 17 allows the debtor to request a stay of claims when applying for a protective settlement, provided it attaches a report from a trustee listed in the register of bankruptcy trustees.
للمدين -عند طلب افتتاح إجراء التسوية الوقائية- أن يطلب من المحكمة تعليق المطالبات، على أن يرفق بطلبه تقريراً معداً من أمين مدرج بقائمة أمناء الإفلاس يتضمن ترجيح
- Article 18
Article 18 sets the stay of claims at no more than 90 days, extendable by 30 days at the debtor's request up to a maximum of 180 days, and explains when the stay ends.
1- دون إخلال بأحكام الفصل (الرابع عشر) من النظام، للمحكمة تعليق المطالبات لمدة لا تزيد على (تسعين) يوماً من تاريخ افتتاح الإجراء، ولها تمديد هذه المدة لـ (ثلاثي
- Article 19
Article 19 requires the debtor to notify its creditors of the stay of claims decision as soon as it is issued, and to exercise due diligence to persuade them to approve the proposal.
يلتزم المدين بتبليغ دائنيه بقرار المحكمة بتعليق المطالبات فور صدوره، وعليه بذل العناية الواجبة خلال مدة تعليق المطالبات لإقناع دائنيه بالتصويت بالموافقة على الم
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.