Article 185 of the Saudi Bankruptcy Law
المادة 185 من نظام الإفلاس · الفصل العاشر: التمويل: التمويل غير المضمون في إجراءات التسوية الوقائية وإعادة التنظيم المالي
The article provides that unsecured financing does not need the court's approval in protective settlement and financial reorganization, including the procedures for small debtors.
Official text (Arabic)
This article has not been amended since the law was issued.
لا تشترط موافقة المحكمة على التمويل غير المضمون في إجراء التسوية الوقائية أو إجراء التسوية الوقائية لصغار المدينين أو إجراء إعادة التنظيم المالي أو إجراء إعادة التنظيم المالي 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 185 explained in plain English
This article exempts unsecured financing from the requirement of court approval in four procedures:
- Protective settlement.
- Protective settlement for small debtors.
- Financial reorganization.
- Financial reorganization for small debtors.
This means that the debtor in these procedures can obtain financing that does not have the character of secured financing without needing the court's permission. What counts as secured financing is set out in Article 184, and one form is that the financing has priority over unsecured debts at the time its request is submitted, or is secured by a pledge of a debtor asset on the conditions set out in it, or any other form specified by the Implementing Regulations. If the financing falls within none of these forms it is unsecured and this article's rule applies to it.
The rule is different in the liquidation procedures: Article 186 provides that the court approves financing in the liquidation procedure or liquidation for small debtors, whether secured or unsecured, at the request of the trustee accompanied by an expert's report, when it is necessary to preserve the value of the estate's assets or increase the proceeds of their sale, and after the creditors' approval.
So the distinction rests on both the type of procedure and the type of financing. To assess a particular situation, it is advisable to consult a lawyer specialized in bankruptcy and commercial matters.
Practical example
A small shop in Makkah has had the protective settlement procedure for small debtors opened, and agreed with one of its suppliers to defer the price of new goods without any pledge or priority. This is unsecured financing, so the shop does not need the court's approval for it.
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 185 of the Saudi Bankruptcy Law
Do I need the court's approval to take unsecured financing during protective settlement?
No. The court's approval is not required for unsecured financing in protective settlement and financial reorganization, including the procedures for small debtors.
Does this exemption apply to the liquidation procedure?
No. Article 186 makes financing in liquidation and liquidation for small debtors, secured or unsecured, subject to the court's approval on its conditions.
More articles on Financing During Bankruptcy
- Article 70
The article lists the acts for which the debtor needs the trustee's written approval from the opening of financial reorganization until the proposal is approved.
1- دون الإخلال بالأنظمة ذات العلاقة، يجب على المدين الحصول على موافقة مكتوبة من الأمين - خلال المدة من افتتاح إجراء إعادة التنظيم المالي إلى التصديق على المقترح
- Article 85
The article sets out the acts requiring the trustee's written approval from confirmation of the proposal until the financial restructuring procedure ends.
1- يجب على المدين الحصول على موافقة مكتوبة من الأمين عند القيام خلال المدة من التصديق على المقترح إلى إنهاء إجراء إعادة التنظيم المالي بأي من الأعمال الآتية: أ-
- Article 101
No security created during the liquidation procedure is valid unless the creditors voted in favor under Article 108 and the court approved it.
لا يصح أي ضمان ينشأ خلال إجراء التصفية ما لم يصوت عليه الدائنون بالموافقة وفقاً لحكم المادة (الثامنة بعد المائة) من النظام وتوافق عليه المحكمة.
- Article 182
The article sets limits on the debtor obtaining secured or unsecured financing after bankruptcy procedures open, and provides that an act contrary to them is void.
1- لا يجوز للمدين الحصول على تمويل مضمون بعد افتتاح أي من إجراءات الإفلاس إلا بعد موافقة المحكمة وفقاً لأحكام النظام. 2- لا يجوز الحصول على تمويل غير مضمون بعد
- Article 183
The article allows the debtor in protective settlement and financial reorganization to ask the court for approval of secured financing with an expert's report, and the court approves if necessary to continue the business or preserve the estate's assets.
للمدين في إجراء التسوية الوقائية وإجراء التسوية الوقائية لصغار المدينين وإجراء إعادة التنظيم المالي وإجراء إعادة التنظيم المالي لصغار المدينين أن يطلب من المحكم
- Article 184
The article sets out the cases in which financing given to the debtor counts as secured financing, including priority over unsecured debts, pledges on stated conditions, and whatever the Implementing Regulations specify.
يعد التمويل مضموناً إذا كان: أ- ذا أولوية على الديون غير المضمونة وقت تقديم طلب التمويل. ب - مضموناً برهن أصل للمدين ليس محلاً لرهن آخر. ج - مضموناً برهن أصل لل
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.