Article 206 of the Saudi Bankruptcy Law
المادة 206 من نظام الإفلاس · الفصل الثالث عشر: العقوبات والتعاملات القابلة للإلغاء: نطاق التطبيق
The article requires the bankruptcy trustee, if he suspects the debtor or any of its creditors of any of the acts criminalized by the law, to go to the competent authority.
Official text (Arabic)
This article has not been amended since the law was issued.
إذا اشتبه أمين الإفلاس في ارتكاب المدين أو أي من دائنيه أياً من الأفعال المجرمة بموجب النظام، فعليه التقدم إلى الجهة المعنية.
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 206 explained in plain English
This article places a specific duty on the bankruptcy trustee: if he suspects that the debtor or any of its creditors has committed any of the acts criminalized by the law, he must go to the competent authority.
The following points should be noted:
- The duty is mandatory: the article says he must go, so it is an obligation on the trustee and not merely an option.
- Suspicion is enough: the article does not require the trustee to be certain that the act occurred; suspecting it is sufficient.
- It covers the debtor and the creditors: the trustee reports criminalized acts whether they come from the debtor or from any of its creditors.
- The authority: the article says to go to the competent authority without naming it.
The point of the rule is that through his work the trustee sees the debtor's assets, books and the creditors' claims, so he is in a position to discover manipulation, such as hiding assets or filing exaggerated claims.
The article is linked to Article 205, which allows the court, when considering imposing penalties, at the request of an interested party, to order the nullity of a transaction, the recovery of assets or compensation, and to Article 207, which punishes anyone who violates the provisions of the law and the Implementing Regulations with a fine of up to SAR 500,000, without prejudice to Article 203. For an assessment of a specific situation, consult a lawyer specializing in bankruptcy and commercial cases or in criminal cases.
Practical example
While reviewing the books of a company in liquidation in Jeddah, the bankruptcy trustee noticed that large sums were transferred to a partner's account shortly before the opening, for no apparent reason. In this case the trustee must go to the competent authority, without waiting until he is sure that a violation occurred.
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 206 of the Saudi Bankruptcy Law
What does the bankruptcy trustee do if he suspects the debtor of fraud?
He must go to the competent authority if he suspects the debtor or any of its creditors of committing any of the acts criminalized by the law.
Does the bankruptcy trustee also report creditors?
Yes. The duty covers suspicion of acts by the debtor or any of its creditors.
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 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
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.