Article 74 of the Saudi Bankruptcy Law
المادة 74 من نظام الإفلاس · الفصل الرابع: إجراء إعادة التنظيم المالي: تشكيل لجنة للدائنين
If creditors are numerous and the nature of their debts or rights differs, the debtor in financial reorganization must classify them into classes as the Implementing Regulations specify.
Official text (Arabic)
This article has not been amended since the law was issued.
إذا تعدد الدائنون وكان هناك اختلاف في طبيعة ديونهم أو حقوقهم، فعلى المدين تصنيفهم إلى فئات وفقاً لما تحدده اللائحة.
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 74 explained in plain English
Creditors' debts and rights are not always identical; they may differ in nature. This article therefore requires the debtor in the financial reorganization procedure to classify its creditors into classes if two things come together:
- The creditors are numerous.
- There is a difference in the nature of their debts or rights.
The party required by the text to classify is the debtor, and the classification is done as the Implementing Regulations specify. The article itself does not give the names of the classes, the criteria for classification or their number; all of that is for the Implementing Regulations.
This provision is linked to the debtor's role in the procedure, as Article 75 provides that the debtor prepares the proposal with the trustee's help within the period the court sets in its ruling opening the financial reorganization procedure, and that the proposal includes an overview of its financial position and the information and documents the Implementing Regulations specify. Article 73 also deals with the creditors' committee, which is formed in the cases the Implementing Regulations specify.
If you are a creditor and think the class you were placed in does not reflect the nature of your debt or rights, you can consult a lawyer specializing in bankruptcy and commercial cases to learn what the Implementing Regulations allow on this.
Practical example
A manufacturing company in Riyadh is in a financial reorganization procedure. Its creditors are a bank holding a mortgage on the factory and a number of suppliers with unsecured debts. Because the nature of their debts and rights differs, the company must classify them into classes as the Implementing Regulations specify.
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 74 of the Saudi Bankruptcy Law
Who classifies creditors into classes in financial reorganization?
The debtor is required to classify them as the Implementing Regulations specify.
When must creditors be classified into classes?
If the creditors are numerous and there is a difference in the nature of their debts or rights.
What are the criteria for classifying creditors?
The article does not state them and refers to the Implementing Regulations for them.
More articles on Creditors' Rights in Bankruptcy
- Article 16
Article 16 requires the ruling opening a protective settlement to set a creditors' vote within 40 days, extendable by another 40 days, and requires the debtor to announce the opening within 7 days.
1- تحدد المحكمة في حكمها الصادر بافتتاح إجراء التسوية الوقائية موعداً لتصويت الدائنين على المقترح، على أن يكون الموعد خلال مدة لا تزيد على (أربعين) يوماً من تار
- Article 17
Article 17 allows the debtor to request a stay of claims when applying for a protective settlement, provided it attaches a report from a trustee listed in the register of bankruptcy trustees.
للمدين -عند طلب افتتاح إجراء التسوية الوقائية- أن يطلب من المحكمة تعليق المطالبات، على أن يرفق بطلبه تقريراً معداً من أمين مدرج بقائمة أمناء الإفلاس يتضمن ترجيح
- Article 18
Article 18 sets the stay of claims at no more than 90 days, extendable by 30 days at the debtor's request up to a maximum of 180 days, and explains when the stay ends.
1- دون إخلال بأحكام الفصل (الرابع عشر) من النظام، للمحكمة تعليق المطالبات لمدة لا تزيد على (تسعين) يوماً من تاريخ افتتاح الإجراء، ولها تمديد هذه المدة لـ (ثلاثي
- Article 20
Article 20 prohibits any action or lawsuit against the debtor or its assets during the stay of claims, and enforcement on security or claims against a guarantor without court approval; any violating action is void.
1- لا يجوز خلال مدة تعليق المطالبات اتخاذ أو استكمال أي من الإجراءات أو التصرفات الآتية: أ- أي إجراء أو تصرف أو دعوى تجاه المدين أو أصوله، بما في ذلك التقدم بطل
- Article 21
Article 21 sets two cases in which the court approves enforcement on security during a stay of claims, addresses the request of a person who finds their property, and lifts the stay for specific claims.
1- توافق المحكمة -خلال مدة تعليق المطالبات- على طلب التنفيذ على أصول التفليسة أو أصول الضامن لدين المدين المقدمة كضمانات في الحالتين الآتيتين: أ- إذا لم يترتب ع
- Article 27
Article 27 limits the right to vote on a protective settlement proposal to a creditor or owner whose statutory or contractual rights are affected by the proposal.
لا يصوت على المقترح إلا الدائن أو المالك الذي يرتب المقترح أثراً في حقوقه النظامية أو التعاقدية، وفقاً لما تحدده اللائحة.
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.