Article 200 of the Saudi Bankruptcy Law
المادة 200 من نظام الإفلاس · الفصل الثالث عشر: العقوبات والتعاملات القابلة للإلغاء: نطاق التطبيق
The article lists acts by an individual debtor, a debtor's managers, board members, officers and others that violate the law if committed before or during bankruptcy and harm others.
Official text (Arabic)
This article has not been amended since the law was issued.
دون الإخلال بأحكام الأنظمة ذات العلاقة، يعد مخالفاً لأحكام النظام كل مدين ذي صفة طبيعية أو مدير لدى مدين أو عضو في مجلس إدارته أو مجلس مديريه أو أي من مسؤوليه أو أي شخص آخر شارك في تأسيسه أو إدارته أو من في حكمهم؛ ارتكب قبل افتتاح أي من إجراءات الإفلاس واحداً أو أكثر من الأفعال الآتية وأدى إلى افتتاحه، أو ارتكبه أثناء سريانه، وترتب على ذلك إضرار بحقوق أي من الأطراف بمن فيهم الدائنون:
أ- إساءة التصرف في أصول المدين أو أصول التفليسة أو احتجازها أو إساءة استعمال صلاحياته.
ب- ممارسة نشاط المدين بقصد الاحتيال على دائنيه.
ج- الاستمرار في ممارسة نشاط المدين مع انتفاء إمكانية تجنب التصفية.
دـ- استخدام أساليب تنطوي على استهتار لتفادي أو تأخير افتتاح إجراء التصفية، يترتب عليها إضرار بحقوق الدائنين، بما في ذلك بيع السلع بأقل من سعر السوق للحصول على سيولة نقدية.
هـ- إبرام صفقات دون مقابل أو بمقابل غير عادل.
و- سداد ديون أي من الدائنين بما يؤدي إلى الإضرار بدائنين آخرين.
ز- إساءة استغلال أي من إجراءات الإفلاس.
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 200 explained in plain English
This article sets out who is liable, when, and for which acts, without prejudice to the relevant laws.
The persons: a debtor who is a natural person, or a manager at the debtor, or a member of its board of directors or board of managers, or any of its officers, or any other person who took part in its establishment or management, or those in an equivalent position.
The conditions: the act is committed either before any bankruptcy procedure is opened and leads to its opening, or while the procedure is in force, and it results in harm to the rights of any of the parties, including creditors.
The acts:
- Mismanaging the debtor's assets or the estate's assets, withholding them, or misusing one's powers.
- Carrying on the debtor's business with the intent to defraud its creditors.
- Continuing to carry on the business when the possibility of avoiding liquidation no longer exists.
- Using reckless methods to avoid or delay the opening of the liquidation procedure, causing harm to creditors' rights, including selling goods below the market price to obtain cash.
- Entering into transactions for no consideration or for an unfair consideration.
- Paying the debts of any creditors in a way that harms other creditors.
- Abusing any of the bankruptcy procedures.
Article 201 complements this rule with a list of other acts that are violations if committed by any person, such as misappropriating or hiding the debtor's assets, destroying its books, or giving misleading information to the bankruptcy trustee, the court or the Bankruptcy Committee. For an assessment of a specific situation, consult a lawyer specializing in bankruptcy and commercial cases or in criminal cases.
Practical example
A manager of a company in Riyadh knew the company would not avoid liquidation, so he sold its inventory far below the market price to raise cash, then paid the debt of a creditor close to him and left the rest, and then the company's liquidation was opened. These acts fall within what the article treats as a violation of the law, provided they harmed the creditors' rights.
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 200 of the Saudi Bankruptcy Law
Is a company manager liable for his acts before bankruptcy?
Yes, if he committed one of the acts in the article before the procedure was opened and it led to its opening, or committed it while the procedure was in force, and it harmed the rights of any of the parties.
Is preferring one creditor over another a violation?
Paying the debts of any creditors in a way that harms other creditors is among the acts that violate the law if the article's conditions are met.
Is continuing the business when liquidation cannot be avoided a violation?
Yes. Continuing to carry on the debtor's business when the possibility of avoiding liquidation no longer exists is among the acts listed in the article.
More articles on Bankruptcy Offenses and Voidable Transactions
- Article 71
At an interested party's request, the court may annul the debtor's disposal of estate assets outside its usual business in breach of Article 70 and recover the assets, taking into account the rights of good-faith third parties.
إذا تصرف المدين في أي من أصول التفليسة خارج نطاق مزاولة نشاطه المعتاد بالمخالفة لحكم الفقرة (1/ن) من المادة (السبعين) من النظام، فللمحكمة أن تقضي -بناء على طلب
- Article 174
The article requires the Bankruptcy Committee to refer the matter to the relevant authority if it sees a need for further verification because of suspicion of a crime or violation in any claim or act.
على لجنة الإفلاس -إذا رأت حاجة لإجراء مزيد من التحقق لوجود شبهة جريمة أو مخالفة منصوص عليها في النظام في أي مطالبة أو تصرف- إحالة الأمر إلى الجهة المعنية.
- Article 201
The article lists acts that violate the Bankruptcy Law if committed by any person before bankruptcy and leading to it, or during it, and harming the parties' rights.
دون الإخلال بأحكام الأنظمة ذات العلاقة، يعد مخالفاً لأحكام النظام كل من ارتكب قبل افتتاح أي من إجراءات الإفلاس واحداً أو أكثر من الأفعال الآتية وأدى إلى افتتاحه
- Article 202
The article lists acts by a creditor, or someone claiming to be one, that violate the law, such as fraudulent claims, harmful arrangements with the debtor and abuse of procedures.
دون الإخلال بأحكام الأنظمة ذات العلاقة، يعد مخالفاً لأحكام النظام كل دائن أو من يدعي هذه الصفة ارتكب قبل افتتاح أي من إجراءات الإفلاس واحداً أو أكثر من الأفعال
- Article 203
The article sets the penalty for the acts criminalized in Articles 200, 201 and 202: imprisonment up to 5 years and a fine up to SAR 5 million or either, with possible bans on managing establishments.
1- دون الإخلال بأي عقوبة أشد ينص عليها نظام آخر، يعاقب كل من ارتكب أياً من الأفعال المجرّمة المنصوص عليها في المواد (المائتين) و(الأولى بعد المائتين) و(الثانية
- Article 204
The article requires the court to notify the Bankruptcy Committee at once of judgments under this chapter, and the Committee to keep a register of the bans issued under Article 203 whose operative part is public.
1- تبلغ المحكمة لجنة الإفلاس بالأحكام الصادرة بموجب هذا الفصل فور صدورها. 2- تنشئ لجنة الإفلاس سجلاً لحفظ ما يصدر من أحكام بمقتضى الفقرة (2) من المادة (الثالثة
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.