Article 21 of the Saudi Bankruptcy Law
المادة 21 من نظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية: أثر تعليق المطالبات
Article 21 sets two cases in which the court approves enforcement on security during a stay of claims, addresses the request of a person who finds their property, and lifts the stay for specific claims.
Official text (Arabic)
This article has not been amended since the law was issued.
1- توافق المحكمة -خلال مدة تعليق المطالبات- على طلب التنفيذ على أصول التفليسة أو أصول الضامن لدين المدين المقدمة كضمانات في الحالتين الآتيتين:
أ- إذا لم يترتب على التنفيذ تأثير في استمرار نشاط المدين أو في الحصول على موافقة الدائنين والملاك على المقترح.
ب- إذا كان رفض الطلب قد يلحق ضرراً بالغاً بالدائن المضمون يتعذر على المدين تعويضه عنه ويفوق الضرر الذي قد يلحق بالمدين والدائنين الآخرين.
2- تنظر المحكمة -خلال مدة تعليق المطالبات- في طلب الدائن الذي وجد عين ماله عند المدين، وذلك وفقاً لما تحدده اللائحة.
3- استثناء من حكم المادة (الثامنة عشرة) من النظام، للمحكمة -بناء على طلب ذي مصلحة- وقف سريان تعليق المطالبات عن مطالبات محددة اتخذ بشأنها إجراء قبل سريان التعليق إذا ثبت لديها أن في ذلك مصلحة للمدين وأغلبية الدائنين.
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 21 explained in plain English
This article addresses cases in which a creditor is permitted to act despite the stay of claims. It contains three provisions:
1- Enforcement on security: During the stay, the court approves a request to enforce on bankruptcy estate assets, or on the assets of a guarantor of the debtor's debt, provided as security, in one of two cases:
- If the enforcement will not affect the continuation of the debtor's business, nor the obtaining of the creditors' and owners' approval of the proposal.
- If rejecting the request could cause serious harm to the secured creditor that the debtor cannot compensate, and which outweighs the harm that could befall the debtor and the other creditors.
2- A person who finds their property in kind: During the stay, the court considers the request of a creditor who finds their property in kind with the debtor, such as someone who finds their goods themselves with the debtor, as the Implementing Regulations specify. The article does not set out the conditions for accepting this request but refers them to the Implementing Regulations.
3- Lifting the stay for specific claims: By way of exception to Article 18, the court, at the request of an interested party, may lift the application of the stay for specific claims on which an action was taken before the stay took effect, if it is established to the court that this is in the interest of the debtor and the majority of creditors.
This article explains what Article 20 says, namely that enforcement on security and claims against a guarantor are not permitted during the stay "except after the court's approval"; it sets out when that approval is given. A secured creditor should consult a lawyer specializing in commercial and bankruptcy cases to assess whether to request enforcement.
Practical example
A bank in Jeddah holds a mortgage over vacant land that a distressed company does not use in its business. During the stay of claims, the bank requested enforcement on the land. If it is established that the enforcement does not affect the continuation of the company's business or the obtaining of the creditors' and owners' approval of the proposal, the court approves the request.
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 21 of the Saudi Bankruptcy Law
Can a bank enforce on a mortgage during a stay of claims?
The court approves this if the enforcement does not affect the continuation of the debtor's business or the creditors' and owners' approval of the proposal, or if rejection would cause the secured creditor serious harm that cannot be compensated and that outweighs the harm to the debtor and the other creditors.
What can someone do if they find their goods in kind with the debtor?
They may submit a request to the court, which considers it during the stay according to what the Implementing Regulations specify.
Can a particular claim be excluded from the stay of claims?
Yes. At the request of an interested party, the court may lift the application of the stay for specific claims on which an action was taken before it took effect, if it is established that this is in the interest of the debtor and the majority of creditors.
Articles this article refers to
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.