Article 211 of the Saudi Bankruptcy Law
المادة 211 من نظام الإفلاس · الفصل الثالث عشر: العقوبات والتعاملات القابلة للإلغاء: التعاملات القابلة للإلغاء
The article requires the court, on an objection under Article 210, to annul the debtor's transaction and its effects, with recovery of assets, security or sums, except in a specified case.
Official text (Arabic)
This article has not been amended since the law was issued.
تقضي المحكمة في الاعتراض المشار إليه في المادة (العاشرة بعد المائتين) من النظام ببطلان تصرف المدين والآثار المترتبة عليه إلا إذا كان التصرف يحقق مصلحة المدين وكان غير متعثر أو مفلس وقت إجرائه، وتقضي مع البطلان بأي مما يأتي:
أ- استرداد الأصول وعوائدها -إن وجدت- أو دفع القيمة العادلة للأصول عند تعذر استردادها.
ب- استرداد الضمانات المقدمة من المدين.
ج- إلزام أي شخص تسلم مبالغ مالية من المدين بردها إلى أمين الإفلاس.
د- إلزام الضامن المبرأة ذمته كلياً أو جزئياً بإعادة ضمانه إلى ما كان عليه أو بتقديم ضمان جديد لا تقل قيمته ودرجة أولويته عن قيمة ودرجة أولوية الضمان السابق وذلك في حال تعذر إعادة الضمان.
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 211 explained in plain English
This article sets out the result of the objection that Article 210 allows against the debtor's transactions before the opening of the bankruptcy procedure. Article 210 lets any interested party object before the court to certain transactions the debtor carried out within 12 months before the opening with an unrelated party, or within 24 months with a related party, such as waiving its assets or entering into a transaction for no consideration or for less than fair value.
Under this article the court orders the nullity of the transaction and the effects resulting from it. The only exception is a transaction that meets two conditions together:
- It served the debtor's interest.
- The debtor was not insolvent or bankrupt when it was carried out.
Along with the nullity, the court orders any of the following:
- Recovery of the assets and their proceeds, if any, or payment of the fair value of the assets if recovery is not possible.
- Recovery of the security the debtor gave.
- Requiring anyone who received sums of money from the debtor to return them to the bankruptcy trustee.
- Requiring a guarantor who was released, wholly or partly, to restore his guarantee to what it was, or to provide a new guarantee whose value and priority rank are not less than those of the earlier guarantee if restoring it is not possible.
The aim is for the value that left the debtor's assets through transactions harming creditors to return to them. Article 212 completes this rule by protecting rights acquired by good-faith third parties unless they were a party to the transaction.
For an assessment of a specific situation, consult a lawyer specializing in bankruptcy and commercial cases.
Practical example
Seven months before the opening of the liquidation procedure, a company in Jeddah sold equipment below its fair value to a company unrelated to it. A creditor objected to the sale under Article 210. If it is not established that the sale served the company's interest and that the company was not insolvent or bankrupt when it was carried out, the court orders it null and orders recovery of the equipment and its proceeds, or payment of its fair value if recovery is not possible.
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 211 of the Saudi Bankruptcy Law
When does the court not annul the debtor's challenged transaction?
If the transaction served the debtor's interest and the debtor was not insolvent or bankrupt when it was carried out; both conditions must be met.
What happens if the asset the debtor disposed of cannot be recovered?
The court orders payment of the asset's fair value instead of recovering it.
To whom are sums that a person received from the debtor returned after the transaction is annulled?
The court requires the person who received them to return them to the bankruptcy trustee.
Articles this article refers to
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.