Article 4 of the Saudi Bankruptcy Law
المادة 4 من نظام الإفلاس · الفصل الأول: أحكام عامة
Article 4 specifies who is subject to the Bankruptcy Law: individuals carrying on commercial, professional or profit-making business, registered companies and profit-making entities, and non-Saudi investors to the extent of their assets in the Kingdom.
Official text (Arabic)
This article has not been amended since the law was issued.
تسري أحكام النظام على كلّ من:
أ - الشخص ذي الصفة الطبيعية الذي يمارس في المملكة أعمالاً تجارية، أو مهنية، أو أعمالاً تهدف إلى تحقيق الربح.
ب - الشركات التجارية والمهنية والكيانات المنظمة وغيرها من الشركات والكيانات الأخرى الهادفة إلى تحقيق الربح، المسجلة في المملكة.
ج - المستثمر غير السعودي ذي الصفة الطبيعية أو الاعتبارية الذي يملك أصولاً في المملكة، أو يزاول أعمالاً تجارية، أو مهنية أو أعمالاً تهدف إلى تحقيق الربح، من خلال منشأة مرخص لها في المملكة. ولا يخضع لإجراءات النظام سوى أصول ذلك المستثمر الموجودة في المملكة.
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 4 explained in plain English
This article answers an important question: to whom does the Bankruptcy Law apply? It specifies three categories:
- A natural person (an individual) who carries on commercial or professional business in the Kingdom, or business aimed at making a profit. The Law is therefore not limited to companies, but includes the individual merchant and the freelance professional.
- Commercial and professional companies and regulated entities and other companies and entities that aim to make a profit, on condition that they are registered in the Kingdom.
- A non-Saudi investor, whether an individual or a company, who owns assets in the Kingdom or carries on commercial, professional or profit-making business in it through an establishment licensed in the Kingdom. But the Law's procedures cover only its assets located in the Kingdom.
It is understood from the text that the criterion for being subject to the Law is carrying on a commercial, professional or profit-making activity, or the existence of a profit-making entity registered in the Kingdom, as stated in the three categories.
This article complements Article 3, which specifies the regulated entities and requires the competent authority's approval before a request for their bankruptcy is registered, and Article 5, which sets out the objectives of the bankruptcy procedures.
Anyone who doubts that the Law applies to their situation would do well to consult a lawyer specialized in commercial and bankruptcy cases.
Practical example
Khaled is a self-employed consulting engineer in Dammam and has accumulated debts from his professional activity. Under this article he may be subject to the Bankruptcy Law because he is a natural person carrying on professional business in the Kingdom. As for a foreign investor who owns a licensed establishment in Riyadh, the procedures cover only its assets located in the Kingdom.
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 4 of the Saudi Bankruptcy Law
Does the Bankruptcy Law apply to individuals?
Yes. It applies to a natural person who carries on commercial or professional business in the Kingdom, or business aimed at making a profit.
Does bankruptcy cover a foreign investor's money outside the Kingdom?
No. Only the non-Saudi investor's assets located in the Kingdom are subject to the Law's procedures.
Are professional companies subject to the Bankruptcy Law?
Yes. Its provisions apply to commercial and professional companies and profit-making entities registered in the Kingdom.
More articles on General Provisions and the Bankruptcy Committee
- Article 1
Article 1 defines the key terms of the Bankruptcy Law, such as debtor, creditor, defaulting debtor, bankrupt, related party and the different bankruptcy procedures.
يقصد بالألفاظ والمصطلحات الآتية -أينما وردت في هذا النظام- المعاني المبينة أمام كل منها ما لم يقتض السياق خلاف ذلك: النظام: نظام الإفلاس. اللائحة: اللائحة التنف
- Article 2
Article 2 lists the seven bankruptcy procedures the Law regulates, from protective settlement to administrative liquidation.
يهدف النظام إلى تنظيم إجراءات الإفلاس، وهي: 1- التسوية الوقائية. 2- إعادة التنظيم المالي. 3- التصفية. 4- التسوية الوقائية لصغار المدينين. 5- إعادة التنظيم المال
- Article 3
Article 3 specifies which entities are regulated entities and requires the competent authority's approval before a request to open any bankruptcy procedure for them is registered.
1- يعد ما يأتي كياناً منظماً في تطبيق أحكام النظام: أ- الشركات المصرفية وشركات التمويل وشركات التأمين وشركات الصيرفة. ب- الأشخاص المرخص لهم بممارسة أعمال الأورا
- Article 5
Article 5 sets out the objectives of bankruptcy procedures: enabling the debtor to organize its affairs, treating creditors fairly, maximizing asset value, cutting costs and time, and administrative liquidation when assets are weak.
تهدف إجراءات الإفلاس إلى الآتي: أ - تمكين المدين المفلس أو المتعثر أو الذي يتوقع أن يعاني من اضطراب أوضاعه المالية من الاستفادة من إجراءات الإفلاس، لتنظيم أوضاع
- Article 6
Article 6 gives the court the power to issue the judgments and decisions needed for bankruptcy procedures, supervise their execution, decide their disputes and impose penalties.
تصدر المحكمة الأحكام والقرارات اللازمة لتطبيق الإجراءات المنصوص عليها في النظام، وتتولى الإشراف على تنفيذها، والفصل فيما ينشأ عنها من نزاعات، وإيقاع العقوبات ال
- Article 7
Article 7 bars the liquidation of any person under another law unless its assets cover all its debts and it is not defaulting, and makes management members jointly liable if this is violated.
1- مع مراعاة ما ورد في المادة (الرابعة) من النظام، لا يصفى أي شخص بموجب نظام آخر إلا إذا كانت أصوله تكفي لسداد جميع ديونه وكان غير متعثر. 2- إذا تم حل المدين وت
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.