Article 24 of the Saudi Bankruptcy Law
المادة 24 من نظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية: العقود
Article 24 provides that the debtor's contracts remain in force after a protective settlement opens, binds both parties to their later obligations, and lets the contracting party request termination if the debtor defaults.
Official text (Arabic)
This article has not been amended since the law was issued.
1- تعد العقود التي يكون المدين طرفاً فيها قائمة بصرف النظر عن افتتاح إجراء التسوية الوقائية، ويلتزم المتعاقد مع المدين بتنفيذ التزاماته التعاقدية بعد افتتاح الإجراء، مقابل تنفيذ المدين لالتزاماته التي نشأت بعد افتتاح الإجراء، وتدرج في قائمة المطالبات التزامات المدين التعاقدية التي نشأت قبل افتتاح الإجراء ولم يف المدين بها.
2- إذا لم يف المدين بعد افتتاح الإجراء بالتزاماته الناشئة عن العمل بالعقود -التي يكون طرفاً فيها-بموجب الفقرة (1) من هذه المادة، فللمحكمة -بناء على طلب المتعاقد- إنهاء العقد وإبراء المتعاقد من التزاماته التعاقدية دون الإخلال بحقوقه.
3- يلتزم المدين ببذل العناية الواجبة لضمان الوفاء بالتزاماته التعاقدية التي تنشأ بعد افتتاح الإجراء بما في ذلك الوفاء الحالّ أو ما يقوم مقامه من الضمانات التي تضمن حق المتعاقد عند تنفيذه لالتزاماته وفقاً لما تحدده اللائحة.
4- على المدين تنفيذ التزاماته التي نشأت بعد افتتاح الإجراء في آجالها ما لم يتفق مع الطرف الآخر على غير ذلك.
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 24 explained in plain English
This article governs the contractual relationship between the debtor and those contracting with it after a protective settlement opens, and distinguishes between obligations arising before and after the opening.
1- Contracts remain in force: The debtor's contracts are considered to remain in force regardless of the opening of the procedure, and the party contracting with the debtor must perform its obligations after the opening, in return for the debtor performing its obligations that arose after the opening.
2- Earlier obligations: The debtor's contractual obligations that arose before the opening and were not performed are not paid directly but are included in the list of claims.
3- Protection of the contracting party: If, after the opening, the debtor does not perform its obligations arising from the operation of the contracts, the court, at the contracting party's request, may terminate the contract and release the contracting party from its contractual obligations, without prejudice to its rights.
4- Duty of care: The debtor must exercise due diligence to ensure the performance of its obligations that arise after the opening, including immediate performance or an equivalent in the form of guarantees that secure the contracting party's right when it performs its obligations, as the Implementing Regulations specify.
5- Deadlines: The debtor must perform its obligations arising after the opening on their due dates, unless it agrees otherwise with the other party.
This achieves a balance: the contracting party cannot stop performing because of old debts, but in return it is entitled to have new obligations performed on time. This article complements Article 23, which provides that filing the application or the opening has no effect on contracts, while Article 25 allows the debtor to request termination of a contract if necessary to protect its business, under that article's conditions.
Practical example
A building materials supply company in Dammam deals with a contractor for whom a protective settlement procedure has been opened, and the contractor has earlier unpaid invoices with it. The company must continue supplying, and the old invoices are included in the list of claims. If the contractor does not pay for the new supplies, the company may ask the court to terminate the contract.
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 24 of the Saudi Bankruptcy Law
Must a supplier continue supplying a company in a protective settlement?
Yes. The party contracting with the debtor must perform its obligations after the procedure is opened, in return for the debtor performing the obligations that arose after the opening.
What happens to old unpaid invoices from before the protective settlement?
The debtor's contractual obligations that arose before the procedure was opened and were not performed are included in the list of claims.
Can the contract be terminated if the debtor does not pay after the settlement opens?
Yes. If the debtor does not perform its obligations arising after the opening, the court, at the contracting party's request, may terminate the contract and release it from its obligations without prejudice to its rights.
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.