Article 31 of the Saudi Bankruptcy Law
المادة 31 من نظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية: التصويت على المقترح
Article 31 governs the creditors' vote on a protective settlement proposal, the majority required to accept it, the debtor's duty to notify the result, and the court's authority if voting cannot take place.
Official text (Arabic)
This article has not been amended since the law was issued.
1- يصوت الدائنون على المقترح وفقاً للإجراءات الواردة فيه بعد تصويت الملاك بقبوله (إن وجد) وفقاً للمادة (الثامنة والعشرين) من النظام.
2- يكون المقترح مقبولاً إذا صوتت بالموافقة عليه كل فئة من فئات الدائنين، وتعد الفئة موافقة إذا صوت بالموافقة على المقترح دائنون تمثل مطالباتهم ثلثي قيمة ديون المصوتين في الفئة ذاتها، وكان من ضمنهم دائنون تمثل مطالباتهم أكثر من نصف قيمة ديون الأطراف غير ذوي العلاقة (إن وجدوا).
3- تحدد اللائحة الأحكام اللازمة لإدارة عملية التصويت المشار إليها في الفقرة (1) من هذه المادة.
4- على المدين فور نهاية التصويت تبليغ الدائنين والملاك بنتيجة التصويت وإيداعها لدى المحكمة.
5- إذا تعذر تصويت الدائنين على المقترح في الموعد المحدد، فتقضي المحكمة بما تراه مناسباً بما في ذلك تحديد موعد آخر للتصويت أو إنهاء الإجراء.
6- تحدد اللائحة آليات تعديل الخطة.
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 31 explained in plain English
This article explains how creditors vote on the protective settlement proposal submitted by the debtor, and when the proposal is considered accepted.
Order of voting: Creditors vote according to the procedures set out in the proposal itself, after the owners have voted to accept it, if there are owners, under Article 28 of the Bankruptcy Law.
Majority for acceptance: The proposal is not accepted unless every class of creditors approves it. A class is considered to approve when both of the following are met:
- Creditors whose claims represent two thirds of the value of the debts of those voting in the same class approve.
- Among those approving are creditors whose claims represent more than half of the value of the debts of unrelated parties, if any.
What counts is the value of the debts, not the number of creditors, and the calculation is based on the debts of those who actually voted.
After the vote: As soon as voting ends, the debtor must notify the creditors and owners of the result and file it with the court.
If voting cannot take place on time: The court rules as it deems appropriate, including setting another date for the vote or terminating the procedure.
The article refers to the Implementing Regulations for the provisions on administering the voting process and the mechanisms for amending the plan. It is linked to Article 30, which provides for appointing an expert to value disputed claims for voting purposes, and to Article 32, which provides that the debtor must request court approval if the creditors accept the proposal.
To understand the effect of these provisions on a particular situation, it is advisable to consult a lawyer specializing in bankruptcy and commercial cases.
Practical example
A contracting company in Riyadh submitted a protective settlement proposal, and its creditors were divided into two classes. In the first class, creditors whose debts total SAR 9 million voted, and those with debts of SAR 6.5 million approved, which is more than two thirds, and among them were unrelated creditors whose claims exceeded half of the unrelated parties' debts. But the second class did not reach the two-thirds threshold, so the proposal is not considered accepted because approval must be achieved in every class.
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 31 of the Saudi Bankruptcy Law
What majority is required to accept a protective settlement proposal?
Every class of creditors must approve. A class is considered to approve if creditors whose claims represent two thirds of the value of the debts of those voting in it approve, including creditors whose claims represent more than half of the debts of unrelated parties, if any.
Is it enough for a majority of creditors overall to agree?
No. The article requires the approval of each class of creditors separately.
What happens if creditors cannot vote on the date set?
The court rules as it deems appropriate, including setting another date for the vote or terminating the procedure.
Who notifies the creditors of the voting result?
The debtor, who must notify the creditors and owners of the result as soon as voting ends and file it with the court.
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.