Article 194 of the Saudi Bankruptcy Law

المادة 194 من نظام الإفلاس · الفصل الحادي عشر: الديون بعملة أجنبية

The article provides that estimated debts or debts to be paid in a foreign currency are converted into Saudi riyals at the exchange rates on the date the procedure opens, and set-off in another currency may be agreed.

Official text (Arabic)

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

تحول مبالغ الديون المقدرة أو المطلوب أداؤها بعملة أجنبية إلى الريال السعودي وفقاً لأسعار الصرف السائدة في تاريخ افتتاح الإجراء، ويجوز الاتفاق على إجراء المقاصة بعملة 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 194 explained in plain English

This article deals with debts in foreign currencies in bankruptcy procedures, which are common in commercial dealings with suppliers or financiers from outside the Kingdom.

It sets two rules:

Conversion to riyals: the amounts of debts that are estimated or required to be paid in a foreign currency are converted into Saudi riyals according to the exchange rates prevailing on the date the procedure is opened.
Set-off in another currency: it is permitted to agree to carry out set-off in another currency.

Fixing the date of opening as the set date for conversion puts all debts in a single currency at a single moment, so the value of a creditor's claim is not affected by fluctuations in the exchange rate after this date, and claims are easier to calculate and compare.

The article is linked to the set-off provisions: Article 193 makes a creditor's claim in liquidation and liquidation for small debtors the amount remaining of its debt after set-off, and what remains owed to the debtor is paid to the trustee. Article 195 gives the fees and expenses of the bankruptcy trustee and the expert, if any, and the expenses of selling the estate's assets priority over debts in liquidation and liquidation for small debtors.

To assess a particular situation, it is advisable to consult a lawyer specialized in bankruptcy and commercial matters.

Practical example

The liquidation procedure was opened for a Saudi company, which owes a foreign supplier a debt in US dollars. The supplier's claim is calculated in Saudi riyals at the dollar exchange rate prevailing on the date the procedure was opened, even if the rate changes afterward, unless the parties agree to carry out set-off in another currency.

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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