Article 186 of the Saudi Bankruptcy Law
المادة 186 من نظام الإفلاس · الفصل العاشر: التمويل: أحكام التمويل المضمون أو غير المضمون في إجراء التصفية
The article provides that the court approves financing in liquidation and liquidation for small debtors at the trustee's request with an expert's report, when necessary to preserve asset value, and after creditors' approval.
Official text (Arabic)
This article has not been amended since the law was issued.
توافق المحكمة على التمويل -بناء على طلب الأمين المرافق له تقرير من خبير يؤيد الطلب- في إجراء التصفية أو إجراء التصفية لصغار المدينين -سواء كان مضموناً أو غير مضمون- متى كان ضرورياً للحفاظ على قيمة أصول التفليسة أو زيادة حصيلة بيعها، وذلك بعد موافقة الدائنين وفق حكم المادة (الثامنة بعد المائة) من النظام.
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 186 explained in plain English
This article regulates financing in the liquidation procedure and the liquidation procedure for small debtors, whether the financing is secured or unsecured. It sets the following conditions for the court's approval of it:
- The request is submitted by the trustee, not by the debtor.
- The request is accompanied by a supporting report from an expert.
- The financing is necessary to preserve the value of the bankruptcy estate's assets or to increase the proceeds of their sale.
- It is preceded by the creditors' approval under the provision of Article 108 of the Law.
Note that the purpose of the financing here differs from that in the settlement and reorganization procedures; liquidation aims to sell assets and distribute their proceeds, so the article ties financing to preserving the value of the assets or increasing the proceeds of their sale.
This article differs from Article 185, which does not require the court's approval for unsecured financing in protective settlement and financial reorganization; in liquidation even unsecured financing needs the court's approval. Article 187 adds that any secured financing the court approves is considered priority financing.
To assess a particular situation, it is advisable to consult a lawyer specialized in bankruptcy and commercial matters.
Practical example
In the liquidation of an agricultural company in Al-Qassim, the bankruptcy trustee sees that the date harvest will spoil unless it is stored in cooled warehouses, and that selling it after storage raises its proceeds. The trustee asks the court to approve financing for this purpose with an expert's report supporting it, and after the creditors' approval under Article 108.
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 186 of the Saudi Bankruptcy Law
Who requests financing in the liquidation procedure?
The bankruptcy trustee submits the request, accompanied by a supporting report from an expert.
Does unsecured financing in liquidation need the court's approval?
Yes. The article covers secured and unsecured financing in liquidation and liquidation for small debtors.
When does the court approve financing in liquidation?
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 under Article 108.
Articles this article refers to
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.