Article 192 of the Saudi Bankruptcy Law

المادة 192 من نظام الإفلاس · الفصل الحادي عشر: الديون المستبعدة

The article provides that debts and dealings arising after the date the procedure is opened are not mutual for automatic set-off, and are valid and produce their effects.

Official text (Arabic)

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

لا تعد الديون والتعاملات الناشئة في وقت لاحق لتاريخ افتتاح الإجراء ديوناً أو تعاملات تبادلية لغرض المقاصة التلقائية، وتعد هذه الديون والتعاملات صحيحة ومنتجة لآثارها.

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 192 explained in plain English

This article sets out the time scope of automatic set-off. Article 191 makes opening liquidation, liquidation for small debtors or administrative liquidation a cause for automatic set-off between what the debtor is owed by its creditor on the date of opening and what this creditor is owed by the debtor.

This article provides two rules:

Excluding later debts: debts and dealings arising at a time later than the date the procedure is opened are not considered mutual debts or dealings for the purpose of automatic set-off, so they do not enter into the set-off that opening causes.
Their validity: these later debts and dealings are valid and produce their effects, so excluding them from set-off does not mean they are void.

The practical benefit is that a person who deals with the debtor or the estate after opening cannot use the new debt to deduct an old debt owed to it by the debtor before opening, while on the other hand the new dealings remain in force and binding.

Article 193 completes the picture by providing that a creditor's claim submitted to the trustee in liquidation or liquidation for small debtors is for the amount remaining of its debt after set-off. To assess a particular situation, it is advisable to consult a lawyer specialized in bankruptcy and commercial matters.

Practical example

A merchant in Dammam was owed SAR 70,000 by a company before its liquidation was opened, and after opening bought goods from the estate for SAR 20,000. He may not deduct the price of the goods from his old debt by automatic set-off, and the purchase contract is valid and he must pay the price.

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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