Article 171 of the Saudi Bankruptcy Law
المادة 171 من نظام الإفلاس · الفصل التاسع: إجراء التصفية الإدارية: تعليق المطالبات
The article requires appointing the Bankruptcy Committee to manage administrative liquidation, strips the debtor of control on its appointment, voids its later dealings in its assets, and requires the committee to notify it of matters concerning it.
Official text (Arabic)
This article has not been amended since the law was issued.
1- تعين المحكمة في حكمها بافتتاح إجراء التصفية الإدارية لجنة الإفلاس للقيام بمهمات إدارة الإجراء.
2- تغل يد المدين عن إدارة نشاطه فور تعيين لجنة الإفلاس.
3- تحل لجنة الإفلاس محل المدين في إدارة نشاطه والوفاء بواجباته النظامية خلال فترة الإجراء، ولا تسأل في مواجهة الغير عن التصرفات التي تجريها.
4- يعد باطلاً كل تصرف يقع من المدين على أصوله بعد تعيين لجنة الإفلاس، وللمحكمة -بناء على طلب لجنة الإفلاس- أن تقضي باسترداد الأصول أو بما تراه مناسباً، وذلك مع مراعاة حقوق الغير (حسن النية)، وللمتضرر أن يتقدم بدعوى التعويض.
5- تبلغ لجنة الإفلاس المدين بأي استدعاء أو إخطار أو أمر يخصه يصدر عن المحكمة أو أي جهة معنية أخرى.
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 171 explained in plain English
This article specifies who manages the administrative liquidation procedure and the effect of that on the debtor.
- Appointment: the court appoints, in its ruling opening the procedure, the Bankruptcy Committee to carry out the duties of managing it.
- Removal of control: the debtor is stripped of managing its business immediately on the appointment of the Bankruptcy Committee.
- Taking the debtor's place: the committee takes the debtor's place in managing its business and meeting its legal obligations during the procedure, and is not liable to third parties for the acts it carries out.
- Voidness of the debtor's acts: any act by the debtor concerning its assets after the committee's appointment is considered void. The court may, at the committee's request, rule to recover the assets or as it sees fit, taking into account the rights of good-faith third parties, and a person harmed may bring a compensation claim.
- Notification: the committee notifies the debtor of any summons, notice or order concerning it issued by the court or any other relevant authority.
The committee is appointed in the opening ruling issued under Article 170, and then begins its duties, which include what Article 172 provides: announcing the ruling and inviting creditors to submit their claims within a period of no more than 60 days.
A person who dealt with a debtor after the committee's appointment and is affected by this voidness may consult a lawyer specialized in bankruptcy and commercial matters.
Practical example
After administrative liquidation of an establishment in Al-Ahsa was opened and the Bankruptcy Committee appointed, its owner tried to sell a cooling unit from the establishment's equipment. This sale is void because his control was removed from managing the business, and the court, at the committee's request, may rule to recover the unit, taking into account the rights of the buyer if in good faith, and a person harmed may file a compensation claim.
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 171 of the Saudi Bankruptcy Law
Who manages administrative liquidation?
The Bankruptcy Committee that the court appoints in the ruling opening the procedure, which takes the debtor's place in managing its business and meeting its legal obligations.
Can the debtor deal with its funds after administrative liquidation is opened?
Its control over managing its business is removed immediately on the appointment of the Bankruptcy Committee, and any act by it concerning its assets after the appointment is void.
Is the Bankruptcy Committee liable to third parties for its acts?
No. The text states that it is not liable to third parties for the acts it carries out.
More articles on Administrative Liquidation
- 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 122
The article sets out two cases in which the court ends the liquidation procedure at the trustee's request, allows it without a hearing, and provides for dissolving a debtor with legal personality.
1- تقضي المحكمة بإنهاء إجراء التصفية في الحالتين الآتيتين: أ- إذا تقدم الأمين بطلب إنهاء الإجراء لعدم كفاية حصيلة بيع أصول التفليسة للوفاء بمصروفات إجراء التصفي
- Article 123
The article requires the court to open administrative liquidation and refer the papers to the Bankruptcy Committee if it ended the liquidation because the sale proceeds were insufficient for its expenses.
تقضي المحكمة بافتتاح إجراء التصفية الإدارية للمدين إذا قضت بإنهاء الإجراء بموجب الفقرة (1/أ) من المادة (الثانية والعشرين بعد المائة) من النظام، وتحيل أوراق الدع
- Article 158
The article lets the court, of its own motion or at an interested party's request, open liquidation for small debtors or administrative liquidation after reorganization ends, on three conditions.
تقضي المحكمة -من تلقاء نفسها أو بناء على طلب ذي مصلحة - بافتتاح إجراء التصفية لصغار المدينين أو التصفية الإدارية إذا تحققت الشروط الآتية: أ- أن يكون المدين الصغ
- Article 164
The article requires the trustee to ask the court to end liquidation for small debtors as soon as it learns that proceeds from selling the estate's assets will not cover the procedure's expenses.
يلتزم الأمين بتقديم طلب إلى المحكمة لإنهاء إجراء التصفية لصغار المدينين فور علمه بعدم كفاية حصيلة بيع أصول التفليسة للوفاء بمصروفات إجراء التصفية لصغار المدينين
- Article 167
The article states that administrative liquidation aims to sell bankruptcy estate assets whose sale is not expected to produce proceeds enough for the expenses of liquidation or small debtor liquidation.
يهدف إجراء التصفية الإدارية إلى بيع أصول التفليسة التي لا يتوقع أن ينتج عن بيعها حصيلة تكفي للوفاء بمصروفات إجراء التصفية أو إجراء التصفية لصغار المدينين.
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.