Article 72 of the Saudi Bankruptcy Law
المادة 72 من نظام الإفلاس · الفصل الرابع: إجراء إعادة التنظيم المالي: حظر التصرف في الأصول
The trustee may ask the court to replace the security given to a debtor's creditor with equivalent security where this is in the interest of a majority of creditors, without prejudice to the secured creditor's rights.
Official text (Arabic)
This article has not been amended since the law was issued.
دون الإخلال بحقوق الدائن المضمون، للأمين -خلال الفترة من افتتاح إجراء إعادة التنظيم المالي إلى التصديق على المقترح- التقدم إلى المحكمة بطلب الموافقة على إبدال ضمان مقدم لدائن المدين بضمان آخر مكافئ له متى كان في ذلك مصلحة لأغلبية 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 72 explained in plain English
A majority of creditors may have an interest in freeing an asset provided as security to one of the creditors. This article gives the trustee a way to do that in the financial reorganization procedure:
- Who requests: The trustee, by a request it submits to the court.
- When: In the period from the opening of the financial reorganization procedure to the approval of the proposal.
- What it requests: Approval to replace security provided to the debtor's creditor with other security equivalent to it.
- The condition: That the replacement be in the interest of a majority of creditors.
The article provides that this is without prejudice to the rights of the secured creditor; what is required is to put other equivalent security in place of the original security, not to extinguish the security. The decision rests with the court, as the article does not give the trustee authority to make the replacement itself, only the right to submit a request for approval.
The article does not specify how equivalence between the two securities is assessed, nor does it provide for procedures for the secured creditor to object to the request. If you are a secured creditor and learn of such a request, or you are a debtor who needs to free a mortgaged asset, you should consult a lawyer specializing in bankruptcy or in banking and finance.
Practical example
A factory in Jubail is in the financial reorganization stage, and its main warehouse is mortgaged to a bank. The trustee considered that freeing the warehouse is in the interest of a majority of creditors, so it applied to the court before the proposal was approved for approval to replace the mortgage on the warehouse with a mortgage on another piece of the factory's land of equivalent value.
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 72 of the Saudi Bankruptcy Law
Can the mortgage given to a bank be changed during financial reorganization?
The trustee may ask the court to approve replacing the security with other equivalent security where this is in the interest of a majority of creditors, without prejudice to the secured creditor's rights.
When can replacement of the security be requested?
In the period from the opening of the financial reorganization procedure to the approval of the proposal.
Does the trustee itself have the power to replace the security?
No. The trustee submits to the court a request for approval of the replacement.
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.