Article 5 of the Saudi Bankruptcy Law
المادة 5 من نظام الإفلاس · الفصل الأول: أحكام عامة
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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 أوضاعه المالية ولمعاودة نشاطه والإسهام في دعم الاقتصاد وتنميته.
ب - مراعاة حقوق الدائنين على نحو عادل وضمان المعاملة العادلة لهم.
ج - تعظيم قيمة أصول التفليسة والبيع المنتظم لها وضمان التوزيع العادل لحصيلته على الدائنين عند التصفية.
د - خفض تكلفة الإجراءات ومددها وزيادة فعاليتها وبخاصة في إعادة ترتيب أوضاع المدين الصغير أو بيع أصول التفليسة وتوزيعها على الدائنين على نحو عادل خلال مدة محددة.
هـ - التصفية الإدارية للمدين الذي لا يتوقع أن ينتج عن بيع أصوله حصيلة تكفي للوفاء بمصروفات إجراء التصفية أو التصفية لصغار المدينين.
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 5 explained in plain English
This article explains the purposes the bankruptcy procedures were set up to achieve, and it helps in understanding the spirit of the Law and interpreting its provisions. The objectives are:
- Enabling the debtor, whether bankrupt, defaulting or expecting disruption of its financial position, to benefit from the procedures to organize its affairs, resume its business and contribute to supporting the economy. The Law is therefore not limited to someone who has actually fallen into default, but includes someone who expects it.
- Taking creditors' rights into account fairly and ensuring fair treatment of them.
- Maximizing the value of the bankruptcy estate's assets, selling them in an orderly manner and ensuring that the proceeds are distributed fairly to creditors upon liquidation.
- Reducing the cost and duration of the procedures and increasing their effectiveness, especially in rearranging the small debtor's affairs or selling and distributing assets within a specified period.
- Administrative liquidation for a debtor whose asset sale proceeds are not expected to cover the liquidation expenses, or liquidation for small debtors.
These objectives show that the Law balances the debtor's interest in continuing with the creditors' interest in having their rights satisfied fairly. Article 4 specifies those to whom these procedures apply, while Article 6 gives the court the power to issue the judgments and decisions needed to apply them.
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 5 of the Saudi Bankruptcy Law
What is the purpose of the Bankruptcy Law in Saudi Arabia?
It aims to enable the debtor to organize its affairs and resume its business, to take creditors' rights into account fairly, to maximize the value of assets and distribute them fairly, and to reduce the cost and duration of the procedures.
Can someone who has not yet defaulted benefit from the Bankruptcy Law?
Yes. The objectives include enabling a debtor who expects its financial position to be disrupted to benefit from the procedures.
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 4
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.
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
- 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.