Article 37 of the Saudi Bankruptcy Law
المادة 37 من نظام الإفلاس · الفصل الثالث: إجراء التسوية الوقائية: آثار تصديق المحكمة على المقترح
After approval, the protective settlement plan binds the debtor, the creditors and the owners, and the debtor must complete the procedures required by the relevant laws.
Official text (Arabic)
This article has not been amended since the law was issued.
تكون الخطة ملزمة للمدين والدائنين والملاك، وعلى المدين استكمال الإجراءات التي أوجبتها الأنظمة ذات العلاقة.
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 37 explained in plain English
This article sets out the most important effect of the court's approval of a protective settlement proposal, which is that the plan becomes binding.
Whom does the plan bind? The article provides that it is binding on three groups:
- The debtor, which must carry out what it undertook in the plan.
- The creditors; the text is general, without distinguishing between those who approved the proposal and those who rejected it.
- The owners, that is, the debtor's owners, if any.
An additional duty on the debtor: The debtor must also complete the procedures required by the relevant laws. The article does not specify these procedures, so each law is consulted according to what the plan requires.
This article is linked to Article 36, which requires the debtor to notify the creditors of the approval and file a copy of it in the bankruptcy register within 5 days, and to Article 38, which requires the debtor, when the plan has been fully carried out, to ask the court to rule to terminate the procedure, with every interested party having the right to object within 14 days of the filing of the request.
To understand how far you are bound by a particular plan as a creditor or owner, it is advisable to consult a lawyer specializing in bankruptcy and commercial cases.
Practical example
Khaled is a creditor of a restaurant in Medina that entered a protective settlement. He voted to reject the proposal, but the creditor classes accepted it and the court approved it. After approval the plan becomes binding on the creditors under Article 37, so Khaled is bound by it like the other creditors.
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 37 of the Saudi Bankruptcy Law
Does a protective settlement plan bind creditors who rejected it?
The article provides that the plan is binding on the debtor, the creditors and the owners, without distinguishing between those who approved and those who rejected.
What must the debtor do after approval?
Comply with the plan and complete the procedures required by the relevant laws.
Does the plan bind the debtor's owners?
Yes, the plan is binding on the owners as well.
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.