Article 27 of the Saudi Bankruptcy Law

المادة 27 من نظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية: التصويت على المقترح

Article 27 limits the right to vote on a protective settlement proposal to a creditor or owner whose statutory or contractual rights are affected by the proposal.

Official text (Arabic)

This article has not been amended since the law was issued.

لا يصوت على المقترح إلا الدائن أو المالك الذي يرتب المقترح أثراً في حقوقه النظامية أو التعاقدية، وفقاً لما تحدده اللائحة.

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 27 explained in plain English

This article determines who has the right to vote on a protective settlement proposal.

The rule: Only the following may vote on the proposal:

A creditor whose statutory or contractual rights are affected by the proposal.
An owner whose statutory or contractual rights are affected by the proposal.

What this means in practice: Not every creditor votes automatically. If the proposal does not touch the rights of a particular creditor, for example because it provides for its debt to be paid in full on its due date without change, it does not vote under this criterion, because the proposal does not affect its rights. A creditor whose debt will be reduced, deferred or modified in any way is the one with an interest in voting.

The rationale is that the decision should rest with those who will actually bear the effect of the proposal.

The article refers to the Implementing Regulations for the details, so the method of determining whose rights the proposal affects and the procedures for doing so are found in the Implementing Regulations.

Article 28 governs owners' voting specifically, requiring the debtor to invite them to vote if the proposal includes anything affecting their rights, with their vote preceding the creditors' vote. A creditor who doubts its right to vote should consult a lawyer specializing in commercial and bankruptcy cases.

Practical example

A company in Riyadh submitted a protective settlement proposal that reduces suppliers' debts by a set percentage and defers their payment, while leaving one creditor's debt as it is without any change. The suppliers vote because the proposal affects their rights, but the creditor whose debt is unaffected does not vote under this article.

Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.

How we write and review content

A question about Article 27 of Bankruptcy Law?

Describe what happened and specialist lawyers answer. You can write in English.