Article 20 of the Saudi Bankruptcy Law
المادة 20 من نظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية: أثر تعليق المطالبات
Article 20 prohibits any action or lawsuit against the debtor or its assets during the stay of claims, and enforcement on security or claims against a guarantor without court approval; any violating action is void.
Official text (Arabic)
This article has not been amended since the law was issued.
1- لا يجوز خلال مدة تعليق المطالبات اتخاذ أو استكمال أي من الإجراءات أو التصرفات الآتية:
أ- أي إجراء أو تصرف أو دعوى تجاه المدين أو أصوله، بما في ذلك التقدم بطلب افتتاح أي من إجراءات الإفلاس.
ب- أي إجراء للتنفيذ على أصول التفليسة المقدمة كضمانات، إلا بعد موافقة المحكمة.
ج- أي إجراء أو تصرف ضد الضامن الشخصي أو مقدم الضمان العيني لدين المدين، إلا بعد موافقة المحكمة.
د- أي من الإجراءات أو التصرفات التي تنص عليها اللائحة.
2- يعد باطلاً كل إجراء مخالف لحكم الفقرة (1) من هذه المادة.
3- للمحكمة من تلقاء نفسها أو بناء على طلب ذي مصلحة أن تقضي باسترداد أي أصول جرى التصرف فيها خلال مدة تعليق المطالبات أو بما تراه مناسباً، وذلك مع مراعاة حقوق الغير (حسن النية)، وللمتضرر أن يتقدم بدعوى التعويض.
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 20 explained in plain English
This article sets out the practical effect of the stay of claims, that is, what creditors and others are prohibited from doing during it.
Prohibited actions (whether taking or continuing them):
- Any action, act or lawsuit against the debtor or its assets, including filing an application to open any of the bankruptcy procedures. This prohibition is absolute in the text.
- Any enforcement action against the bankruptcy estate assets provided as security (such as mortgaged assets), except after the court's approval.
- Any action or act against a personal guarantor (such as a surety) or a provider of security in rem for the debtor's debt, except after the court's approval.
- Any other actions or acts provided for by the Implementing Regulations.
Penalty for violation: Any action that violates this prohibition is considered void.
Recovery of assets: The court, on its own initiative or at the request of an interested party, may order the recovery of any assets disposed of during the stay, or order whatever it deems appropriate, taking into account the rights of good-faith third parties. An injured party may file a claim for compensation.
Note that the stay also protects the guarantor and surety, so a creditor cannot circumvent the stay by claiming against the surety without the court's approval. The cases in which the court approves enforcement on security are set out in Article 21. Under Article 19, the debtor must notify its creditors of the stay decision as soon as it is issued.
Before taking any action during the stay, a creditor should consult a lawyer specializing in commercial and bankruptcy cases to avoid its actions being void.
Practical example
A bank in Riyadh lent to a company against a personal guarantee from its owner, and the court then stayed claims in the company's protective settlement procedure. During the stay, the bank cannot claim against the guarantor without the court's approval, and if it takes an action without that approval, the action is considered void.
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 20 of the Saudi Bankruptcy Law
Can a lawsuit be filed against the company during the stay of claims?
No. During the stay, no action, act or lawsuit may be taken or continued against the debtor or its assets, and any violating action is void.
Can the surety be claimed against during the stay of claims?
No action may be taken against a personal guarantor or a provider of security in rem for the debtor's debt except after the court's approval.
Can a mortgage be enforced during a protective settlement?
Enforcement on the bankruptcy estate assets provided as security is not permitted during the stay except after the court's approval.
What if someone disposes of the debtor's assets during the stay?
The court may order the recovery of those assets or order whatever it deems appropriate, taking into account the rights of good-faith third parties, and an injured party may file a claim for compensation.
More articles on Protective Settlement
- Article 13
Article 13 allows a debtor at risk of default, defaulting or bankrupt to request the opening of protective settlement, and bars it if it underwent the procedure in the previous twelve months.
1- دون الإخلال بأحكام الأنظمة ذات العلاقة، للمدين التقدم إلى المحكمة بطلب افتتاح إجراء التسوية الوقائية في أي من الحالات الآتية: أ- إذا كان من المرجح أن يعاني م
- Article 14
Article 14 requires the protective settlement request to be accompanied by the proposal, information and documents, and the proposal to include the debtor's financial position and a classification of creditors into classes.
1- يقيد طلب افتتاح إجراء التسوية الوقائية لدى المحكمة بعد تقديمه مرافقاً له المقترح والمعلومات والوثائق ذات العلاقة، وفقاً لما تحدده اللائحة. 2- يجب أن يتضمن ال
- Article 15
Article 15 governs how the court hears a protective settlement application within 40 days, and when it opens the procedure, rejects the application, or adjourns the hearing for up to 21 days.
1- تحدد المحكمة موعداً للنظر في طلب افتتاح إجراء التسوية الوقائية على أن يكون الموعد خلال مدة لا تزيد على (أربعين) يوماً من تاريخ قيد الطلب، وتبلغ المحكمة المدي
- Article 16
Article 16 requires the ruling opening a protective settlement to set a creditors' vote within 40 days, extendable by another 40 days, and requires the debtor to announce the opening within 7 days.
1- تحدد المحكمة في حكمها الصادر بافتتاح إجراء التسوية الوقائية موعداً لتصويت الدائنين على المقترح، على أن يكون الموعد خلال مدة لا تزيد على (أربعين) يوماً من تار
- Article 17
Article 17 allows the debtor to request a stay of claims when applying for a protective settlement, provided it attaches a report from a trustee listed in the register of bankruptcy trustees.
للمدين -عند طلب افتتاح إجراء التسوية الوقائية- أن يطلب من المحكمة تعليق المطالبات، على أن يرفق بطلبه تقريراً معداً من أمين مدرج بقائمة أمناء الإفلاس يتضمن ترجيح
- Article 18
Article 18 sets the stay of claims at no more than 90 days, extendable by 30 days at the debtor's request up to a maximum of 180 days, and explains when the stay ends.
1- دون إخلال بأحكام الفصل (الرابع عشر) من النظام، للمحكمة تعليق المطالبات لمدة لا تزيد على (تسعين) يوماً من تاريخ افتتاح الإجراء، ولها تمديد هذه المدة لـ (ثلاثي
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.