Article 202 of the Saudi Bankruptcy Law
المادة 202 من نظام الإفلاس · الفصل الثالث عشر: العقوبات والتعاملات القابلة للإلغاء: نطاق التطبيق
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.
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 دائن أو من يدعي هذه الصفة 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 - تقديم مطالبة ضد المدين بقصد الاحتيال، بما في ذلك المبالغة في قيمتها.
ب - الاتفاق مع المدين على ترتيبات يعلم أنها تضر بمصالح الدائنين الآخرين أو تفضله عليهم.
ج - 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 202 explained in plain English
This article concerns the creditor or someone claiming to be a creditor, without prejudice to the relevant laws, whereas Article 201 deals with acts that are violations if committed by any person, such as hiding the debtor's assets or giving misleading information to the bankruptcy trustee.
A creditor violates the law if he commits one of the following acts:
- Filing a claim against the debtor with intent to defraud, including exaggerating its value.
- Agreeing with the debtor on arrangements he knows harm the interests of the other creditors or prefer him over them.
- Abusing any of the bankruptcy procedures.
The act must be committed before any bankruptcy procedure is opened and lead to its opening, or while the procedure is in force, and it must result in harm to the rights of any of the parties, including creditors.
The penalty: Article 203 provides that anyone who commits any of the criminalized acts in Articles 200, 201 and 202 is punished with imprisonment for up to 5 years and a fine of up to SAR 5 million, or one of these two penalties, without prejudice to any more severe penalty in another law. The court may in addition order a ban on managing for-profit establishments and the other bans stated in it, for up to 5 years.
The purpose of the article is to protect the fairness of the procedure among creditors, so that no creditor obtains more than his right through trickery or collusion with the debtor. For an assessment of a specific situation, consult a lawyer specializing in bankruptcy and commercial cases or in criminal cases.
Practical example
A supplier in Jeddah submitted to the bankruptcy trustee a claim of SAR 900,000 against a company under a financial reorganization procedure, although his real debt was only SAR 300,000, in order to raise his share and the weight of his vote. This is among the acts the article treats as a violation of the law if it harms the parties' 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 202 of the Saudi Bankruptcy Law
Is a creditor punished if he exaggerates the value of his debt in bankruptcy?
Filing a claim against the debtor with intent to defraud, including exaggerating its value, is a violation of the law and is punished under Article 203.
Is a creditor's agreement with the debtor to prefer him over others a violation?
Yes, if the creditor knows the arrangements harm the interests of the other creditors or prefer him over them.
What is the penalty for these acts?
Under Article 203, imprisonment for up to 5 years and a fine of up to SAR 5 million, or one of them, and the court may also impose the bans stated in it for up to 5 years.
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 200
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.
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 أ
- 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 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.