Article 34 of the Saudi Bankruptcy Law
المادة 34 من نظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية: التصديق على المقترح
The court approves a protective settlement proposal after verifying that creditors have accepted it and that it meets the fairness criteria, and a rejecting creditor may object at the approval hearing under conditions.
Official text (Arabic)
This article has not been amended since the law was issued.
1- تصدق المحكمة على المقترح بعد التحقق من قبول الدائنين له واستيفائه معايير العدالة.
2- للدائن حق الاعتراض على المقترح أمام المحكمة في جلسة التصديق عليه بدعوى الإخلال بمعايير العدالة إذا صوت برفضه واعتقد بناء على سبب معقول أنه يضر به.
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 34 explained in plain English
This article sets out what the court verifies before approving a protective settlement proposal, and gives a creditor the right to object under specific conditions.
Two conditions for approval: The court approves the proposal only after verifying two things:
- The creditors' acceptance of the proposal.
- That the proposal meets the fairness criteria, which Article 35 sets out: observance of the creditors' voting procedures, their receiving sufficient information to study it and the alternatives available to the debtor, and respect for their existing rights, particularly in the sharing of losses and the distribution of new rights, benefits and security.
Right to object: A creditor may object to the proposal before the court at the approval hearing on the claim that the fairness criteria have been breached, but this is conditional on the creditor:
- Having voted to reject the proposal.
- Believing, on reasonable grounds, that the proposal harms it.
A creditor who approved the proposal is not given a right to object by this article, and the objection is made at the approval hearing itself and on the basis of a breach of the fairness criteria.
Note that Article 33 provides that approval does not relieve the debtor of its obligations relating to its business under other laws. To assess how strong a particular objection is, it is advisable to consult a lawyer specializing in bankruptcy and commercial cases.
Practical example
Saad is a supplier to a retail company in Riyadh that entered a protective settlement. Saad voted to reject the proposal because he believed losses were distributed to his class more heavily than to others without justification. At the approval hearing he objected before the court that the proposal breaches the fairness criteria, and he presented his reasonable grounds for believing it harms him.
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 contentA question about Article 34 of Bankruptcy Law?
Describe what happened and specialist lawyers answer. You can write in English.
- Completely free
- Lawyers from the directory answer
- Your name stays hidden
Commercial & Corporate Law lawyers: ask a specialist about your case
Describe your situation briefly and we'll suggest a lawyer who specialises in this law
Commercial & Corporate Law lawyers
Lawyers who handle this kind of case
شركة امتداد النظام للمحاماة والاستشارات المهنية
- Labour & Employment Law
- Criminal Law
- Criminal Law
- Commercial & Corporate Law
Frequently asked questions about Article 34 of the Saudi Bankruptcy Law
When does the court approve a protective settlement proposal?
After verifying that the creditors accepted it and that it meets the fairness criteria.
Does any creditor have the right to object to the proposal?
The right to object belongs to a creditor who voted to reject the proposal and believes on reasonable grounds that it harms it, and the objection is made on the claim that the fairness criteria were breached.
When is the objection submitted?
Before the court at the hearing to approve the proposal.
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.