Article 62 of the Saudi Bankruptcy Law
المادة 62 من نظام الإفلاس · الفصل الرابع: إجراء إعادة التنظيم المالي: العقود
The article explains when the court accepts an objection by a party contracting with the debtor to the trustee's decision to terminate its contract during financial reorganization.
Official text (Arabic)
This article has not been amended since the law was issued.
تنظر المحكمة في اعتراض الطرف المتعاقد المقدم أمامها -بناء على الفقرة (4) من المادة (الحادية والستين) من النظام- وتقضي بقبول الاعتراض إذا ثبت لها:
أ - أن إنهاء العقد -المبني على الفقرة (1) من المادة (الحادية والستين) من النظام- غير لازم لتنفيذ الخطة وحماية مصالح أغلبية الدائنين ويلحق ضرراً بالغاً بالطرف المتعاقد.
ب- أن إنهاء العقد -المبني على الفقرة (2) من المادة (الحادية والستين) من النظام- غير لازم لتنفيذ الخطة وحماية مصالح أغلبية الدائنين.
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 62 explained in plain English
This article complements paragraph 4 of Article 61, which provides that the court considers the objection of the party contracting with the debtor to the trustee's decision to terminate its contract. It specifies what must be established to the court for the objection to be accepted, which differs according to the type of contract:
- Contracts in general (terminated under paragraph 1 of Article 61): The court accepts the objection if it is established to it that the termination is not necessary to carry out the plan and to protect the interests of a majority of creditors, and that it causes serious harm to the contracting party.
- Leases of the property in which the debtor carries on its business (terminated under paragraph 2 of Article 61): The court accepts the objection if it is established to it that the termination is not necessary to carry out the plan and to protect the interests of a majority of creditors; the text does not mention serious harm here.
According to the text, the contracting party in general contracts needs to establish both things to the court: that termination is not necessary and that serious harm results; for a property lessor, only that termination is not necessary is mentioned. This is consistent with the conditions for termination themselves in Article 61, as paragraph 1 requires that termination not cause serious harm to the contracting party, whereas paragraph 2 does not mention this condition.
The article sets no deadline for submitting the objection and no procedures, and does not state what follows if it is accepted. Under paragraph 3 of Article 61, the contracting party retains its right to submit a claim to the trustee for the harm it suffered for the purpose of voting on the proposal. Anyone wishing to object should consult a lawyer specializing in bankruptcy and commercial cases to assess their position and evidence.
Practical example
A food supplier in Dammam has a supply contract with a company that entered financial reorganization, and the trustee notified it of the termination of the contract. The supplier depends on this contract for most of its income and considers that the company still needs its supplies. For the court to accept its objection, it must establish that the termination is not necessary to carry out the plan and to protect the interests of a majority of creditors, and that it causes it serious harm.
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 62 of the Saudi Bankruptcy Law
When does the court accept my objection to the trustee's termination of my contract?
It accepts it if it is established to it that the termination is not necessary to carry out the plan and to protect the interests of a majority of creditors, and in general contracts, that it also causes you serious harm.
Must the lessor of a property establish serious harm?
The text does not mention serious harm for leases of the property in which the debtor carries on its business; what is mentioned is that it be established to the court that the termination is not necessary to carry out the plan and to protect the interests of a majority of creditors.
Who decides the objection to the termination of a contract?
The court considers the objection submitted to it under paragraph 4 of Article 61, and rules to accept it if the conditions in the article are established to it.
Articles this article refers to
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 42
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.
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 ا
- 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
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.