Article 42 of the Saudi Bankruptcy Law
المادة 42 من نظام الإفلاس · الفصل الرابع: إجراء إعادة التنظيم المالي: طلب افتتاح الإجراء
The article states who may request the opening of financial reorganization and its three cases, and bars the request if the debtor underwent this procedure in the previous 12 months.
Official text (Arabic)
This article has not been amended since the law was issued.
1- دون الإخلال بأحكام الأنظمة ذات العلاقة، للمدين أو الدائن أو الجهة المختصة التقدم إلى المحكمة بطلب افتتاح إجراء إعادة التنظيم المالي للمدين في أي من الحالات الآتية:
أ- إذا كان من المرجح أن يعاني من اضطرابات مالية يخشى معها تعثره.
ب- إذا كان متعثراً.
ج- إذا كان مفلساً.
2- لا يجوز التقدم بطلب افتتاح إجراء إعادة التنظيم المالي إذا كان سبق للمدين الخضوع إلى هذا الإجراء أو إلى إجراء إعادة التنظيم المالي لصغار المدينين خلال (الاثني عشر) شهراً السابقة لطلب افتتاح الإجراء.
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 42 explained in plain English
This article shows who may request the opening of the financial reorganization procedure, when the request may be made, and when it is barred.
Who submits the request? The request may be submitted to the court by:
- The debtor itself.
- A creditor.
- The competent authority.
This is without prejudice to the provisions of the relevant laws.
Cases in which the request may be made:
- If the debtor is likely to suffer financial difficulties that raise fear of its default, that is, before default has actually occurred.
- If it is in financial distress.
- If it is insolvent.
Bar within 12 months: The request may not be submitted if the debtor underwent the financial reorganization procedure, or the financial reorganization procedure for small debtors, within the 12 months preceding the request to open.
After the request is submitted, Article 43 provides for its filing with the court accompanied by the relevant information and documents as the Implementing Regulations specify. Article 41 also allows the court to open the appropriate bankruptcy procedure after a protective settlement ends in certain cases.
To assess whether your business or your debtor meets these cases, it is advisable to consult a lawyer specializing in bankruptcy and commercial cases.
Practical example
A logistics services company in Riyadh noticed that its major contracts will soon end and its cash flows will not cover its obligations, though it has not yet defaulted. Under Article 42 it may request the opening of financial reorganization because it is likely to suffer financial difficulties that raise fear of its default, provided it did not undergo this procedure, or the similar procedure for small debtors, in the previous 12 months.
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 42 of the Saudi Bankruptcy Law
Who may request financial reorganization?
The debtor, a creditor or the competent authority, without prejudice to the provisions of the relevant laws.
Must the debtor be in financial distress to request financial reorganization?
No. The request may also be made if the debtor is likely to suffer financial difficulties that raise fear of its default, and it may be made if the debtor is in financial distress or insolvent.
Can financial reorganization be requested more than once?
The request may not be made if the debtor underwent this procedure, or the financial reorganization procedure for small debtors, within the 12 months preceding the request.
More articles on Financial Reorganization
- Article 41
After a protective settlement ends, the court, on its own initiative or at an interested party's request, opens the appropriate bankruptcy procedure if three conditions are met together.
تقضي المحكمة -من تلقاء نفسها أو بناء على طلب ذي مصلحة- بافتتاح إجراء الإفلاس المناسب إذا تحققت الشروط الآتية: أ- أن يكون المدين متعثراً أو مفلساً. ب- استيفاء شر
- Article 43
A request to open the financial reorganization procedure is filed with the court after submission, accompanied by the relevant information and documents as the Implementing Regulations specify.
يقيد طلب افتتاح إجراء إعادة التنظيم المالي لدى المحكمة بعد تقديمه مرافقاً له المعلومات والوثائق ذات العلاقة، وفقاً لما تحدده اللائحة.
- Article 44
If someone other than the debtor submits a financial reorganization request, the court notifies the debtor within 5 days, and the debtor may object at the hearing in three cases.
إذا تقدم غير المدين بطلب افتتاح إجراء إعادة التنظيم المالي، فعلى المحكمة تبليغ المدين به خلال مدة لا تزيد على (خمسة) أيام من تاريخ تقديمه، وللمدين الاعتراض على
- Article 45
The debtor, owner, manager, officer, board member and auditor are exempted from the Companies Law provisions on a company's losses reaching a specified percentage, as the Implementing Regulations specify.
يعفى المدين أو المالك أو المدير أو المسؤول أو عضو مجلس الإدارة أو مراجع الحسابات من تطبيق أحكام نظام الشركات فيما يخص بلوغ خسائر الشركة نسبة محددة في ذلك النظام
- Article 46Amended by M/89
Filing a financial reorganization request or opening the procedure stays claims for 180 days, extendable by up to 180 days, with cases for an early end.
1- يترتب على قيد طلب افتتاح إجراء إعادة التنظيم المالي أو افتتاحه، تعليق المطالبات لمدة (مائة وثمانين) يوماً، وللمحكمة من تلقاء نفسها، أو بناءً على طلب الأمين أ
- Article 47
The article governs opening financial reorganization: a hearing within 40 days of filing, a ruling to open, reject or adjourn for up to 21 days, and notice to an absent debtor.
1- يفتتح إجراء إعادة التنظيم المالي بناء على حكم المحكمة بموجب المادة (الحادية والأربعين) من النظام، أو بموجب الفقرة (2) من هذه المادة. 2- تحدد المحكمة موعداً ل
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.