Article 17 of the Saudi Bankruptcy Law
المادة 17 من نظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية: تعليق المطالبات
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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 ترجيحه لقبول أغلبية الدائنين للمقترح وإمكانية تنفيذه.
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 17 explained in plain English
This article deals with the stay of claims in the protective settlement procedure. It is a protection for the debtor that restricts creditors' actions against it for a set period; Article 18 sets out its duration and end.
When is it requested? The debtor may request it from the court when applying for the opening of the protective settlement procedure.
Condition for the request: The debtor must attach to its request a report that meets the following conditions:
- It is prepared by a trustee listed in the register of bankruptcy trustees.
- It includes the trustee's assessment that a majority of the creditors will likely accept the proposal.
- It includes the trustee's assessment of the feasibility of implementing the proposal.
The aim of requiring this report is to prevent the stay of claims from being used to hold up creditors' rights when there is no real prospect of a settlement; an independent professional opinion that the proposal is likely to succeed is needed.
Note that, under the text of the article, a stay in a protective settlement is not automatic; it is made at the debtor's request. Its duration and end are governed by Article 18, which allows the court to stay claims for no more than 90 days from the date the procedure is opened, with the possibility of extension, provided the total period does not exceed 180 days.
Article 16 sets the date of the creditors' vote on the proposal, which is what the debtor aims to reach during the stay period.
Practical example
A retail company in Riyadh fears that a bank will begin enforcement proceedings against its inventory. When filing its protective settlement application, it requests a stay of claims and attaches a report from a trustee listed in the register of bankruptcy trustees, which assesses that a majority of the creditors will likely accept the proposal and that it can be implemented.
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 17 of the Saudi Bankruptcy Law
Is the stay of claims automatic in a protective settlement?
No. The debtor may request it from the court when applying for the opening of the procedure, attaching a report from a trustee listed in the register of bankruptcy trustees.
What must the trustee's report include for a request to stay claims?
It includes the trustee's assessment that a majority of the creditors will likely accept the proposal and that it can be implemented.
When does the debtor request a stay of claims?
It requests it from the court when applying for the opening of the protective settlement procedure.
More articles on Protective Settlement
- Article 13
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.
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 م
- 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 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.