Article 162 of the Saudi Bankruptcy Law

المادة 162 من نظام الإفلاس · الفصل الثامن: إجراء التصفية لصغار المدينين: الهدف

The article requires, for opening liquidation for small debtors, that the small debtor be distressed or bankrupt, that its business cannot continue, and that its assets cover the procedure's expenses.

Official text (Arabic)

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

يشترط لافتتاح إجراء التصفية لصغار المدينين أن يكون المدين الصغير متعثراً أو مفلساً، وأن يتعذر استمرار نشاطه، وأن تكفي أصوله للوفاء بمصروفات إجراء التصفية لصغار المدينين.

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 162 explained in plain English

This article sets out the three conditions that must all be met to open the liquidation procedure for small debtors:

The small debtor is distressed or bankrupt.
Its business cannot continue; if the business can continue, this condition is not met.
Its assets are enough to meet the expenses of the liquidation procedure for small debtors.

The third condition matters in practice, because the procedure needs expenses, so if the debtor's assets are not enough even for these expenses the condition is not met.

Relation to the neighboring articles:

Article 161 allows the small debtor, a creditor or the competent authority to request the liquidation procedure instead of liquidation for small debtors.
Article 163 applies these conditions when considering a creditor's request: the court opens the procedure if the debtor is distressed or bankrupt, and the court considers it likely that its business cannot continue and its assets are enough for the expenses, and the creditor has submitted the required information and documents; it rejects the request if the assets are not enough or the court considers it likely that the business can continue and the claims be settled within a reasonable period.

To assess whether these conditions are met in a particular business, it is advisable to consult a lawyer specialized in bankruptcy and commercial matters.

Practical example

A small clothing shop in Abha has stopped paying its debts and can no longer continue its business, but it has goods and equipment whose value is enough to cover the procedure's expenses. Here the three conditions for opening liquidation for small debtors are met.

Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.

How we write and review content

A question about Article 162 of Bankruptcy Law?

Describe what happened and specialist lawyers answer. You can write in English.