Article 26 of the Saudi Bankruptcy Law
المادة 26 من نظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية: العقود
Article 26 excludes government tender and procurement contracts from Articles 22 to 25, and bank financing contracts from Articles 23 to 25.
Official text (Arabic)
This article has not been amended since the law was issued.
1- يستثنى من أحكام المواد من (الثانية والعشرين إلى الخامسة والعشرين) من النظام عقود المنافسات والمشتريات الحكومية التي تبرمها الجهات الحكومية مع المدين.
2- يستثنى من أحكام المواد من (الثالثة والعشرين إلى الخامسة والعشرين) من النظام عقود التمويل التي تبرمها الشركات المصرفية أو شركات التمويل مع المدين.
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 26 explained in plain English
This article sets two exceptions to the provisions on contracts in the protective settlement procedure, found in Articles 22 to 25:
First exception: government contracts. Government tender and procurement contracts concluded by government entities with the debtor are excluded from the provisions of Articles 22 to 25. That is, these contracts are not subject to any of the four articles.
Second exception: financing contracts. Financing contracts concluded by banking companies or finance companies with the debtor are excluded from the provisions of Articles 23 to 25.
The difference between the two exceptions: The first begins at Article 22, while the second begins at Article 23. This means that bank financing contracts are not excluded from Article 22, unlike government contracts, which are excluded from it, while the provisions of Articles 23 to 25 do not apply to financing contracts.
Among the excluded provisions is Article 25, which allows the court, at the debtor's request, to terminate any contract if necessary to protect its business and in the interest of a majority of creditors without causing serious harm to the contracting party; this provision does not apply to government contracts or to the financing contracts mentioned.
This article matters to contractors and suppliers who contract with government entities, and to companies with bank financing, because the general contract provisions in the protective settlement do not fully apply to their contracts. They should consult a lawyer specializing in commercial and bankruptcy cases or in banking and finance.
Practical example
A contractor in Riyadh has a government procurement contract and a financing contract with a bank, and a protective settlement procedure has been opened for it. Articles 22 to 25 do not apply to its government contract, and Articles 23 to 25 do not apply to the financing contract, but the financing contract is not excluded from Article 22.
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 26 of the Saudi Bankruptcy Law
Do the contract provisions of the protective settlement apply to government contracts?
No. Government tender and procurement contracts concluded by government entities with the debtor are excluded from the provisions of Articles 22 to 25.
Are bank financing contracts excluded from Article 22?
No. Financing contracts concluded by banking companies or finance companies with the debtor are excluded from Articles 23 to 25 only, while the exception from Article 22 is limited to government contracts.
Can the debtor ask the court to terminate a bank financing contract?
Article 25 does not apply to financing contracts concluded by banking companies or finance companies with the debtor, because they are excluded from Articles 23 to 25.
Articles this article refers to
- Article 22
Article 22 provides that filing a protective settlement application or opening the procedure does not accelerate deferred debts or make the price due, and any contrary condition is void.
دون الإخلال بأحكام الفصل (الرابع عشر) من النظام، لا يترتب على قيد طلب افتتاح إجراء التسوية الوقائية أو افتتاحه حلول آجال الديون أو استحقاق الثمن في العقود التي
- Article 23
Article 23 provides that filing a protective settlement application or opening the procedure has no effect on any contract to which the debtor is a party, and any contrary condition is void.
دون الإخلال بأحكام الفصل (الرابع عشر) من النظام، لا يرتب قيد طلب افتتاح إجراء التسوية الوقائية أو افتتاحه أثراً في أي عقد يكون المدين طرفاً فيه، ويعد باطلاً كل
- Article 24
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.
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 الإ
- Article 25
Article 25 allows the court, at the debtor's request, to terminate any contract to which it is a party if necessary to protect its business and in the interest of a majority of creditors without serious harm to the counterparty, except security contracts.
1- للمحكمة -بناء على طلب المدين في جلسة يبلغ بها المتعاقد- إنهاء أي عقد يكون المدين طرفاً فيه إذا كان الإنهاء ضرورياً لحماية نشاطه، وكانت فيه مصلحة لأغلبية الدا
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.