Article 81 of the Saudi Bankruptcy Law
المادة 81 من نظام الإفلاس · الفصل الرابع: إجراء إعادة التنظيم المالي: التصديق على المقترح
A financial restructuring proposal may not include anything that contravenes the provisions of the law and relevant laws on set-off and priority of debts, and any contravening act is void.
Official text (Arabic)
This article has not been amended since the law was issued.
لا يجوز أن يتضمن المقترح ما يخالف أحكام النظام والأنظمة ذات العلاقة بشأن حقوق المقاصة وأولويات الديون، ويعد باطلاً أي تصرف خلاف ذلك.
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 81 explained in plain English
This article places a limit on the content of the financial restructuring proposal: it may not include anything that contravenes the provisions of the Bankruptcy Law and the relevant laws on two matters:
- Set-off rights: In their general sense, the settling of mutual debts between two parties each of which owes the other.
- Priority of debts: That is, the ranking of debts in terms of which are paid ahead of others.
The consequence of a violation is that any act contrary to this provision is void.
The article itself does not set out the rules of set-off or the order of priority, but refers to what is stated in the law and the relevant laws, so these must be consulted to know the rules that apply to each debt. The point is that the proposal, although a means of agreeing on restructuring debts, cannot change what those provisions establish on these two matters.
This provision is connected to Article 80, which governs the court's confirmation of a proposal that meets the fairness criteria, and to Article 82, which governs the trustee's sale of secured assets and the deposit of the proceeds to repay the secured creditor's debt in the order of its security.
If a creditor believes the proposal affects the priority of its debt or its right of set-off, it would do well to consult a lawyer specializing in bankruptcy and commercial cases.
Practical example
A supplier in Riyadh is owed a debt by a company in financial restructuring, and is at the same time indebted to it for another amount. If the proposal includes a clause that contravenes a right of set-off established for the supplier by the law or the relevant laws, that is something the proposal may not include, and the contravening act is void.
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 81 of the Saudi Bankruptcy Law
Can a financial restructuring proposal change the priority of debts?
The proposal may not include anything that contravenes the provisions of the law and the relevant laws on the priority of debts, and any act to the contrary is void.
What is the ruling on a clause in the proposal that contravenes set-off rights?
The proposal may not include anything that contravenes the provisions on set-off in the law and the relevant laws, and any act to the contrary is void.
More articles on Set-Off and Priority of Debts
- Article 82
The trustee sells the bankruptcy estate assets securing the debtor's debt under the plan and with court approval, deposits the net proceeds in a separate account for the secured creditor, and the surplus in the debtor's account.
يتولى الأمين -بناء على الخطة وبعد موافقة المحكمة- بيع أي من أصول التفليسة الضامنة لدين المدين خلال فترة الإجراء بالأسعار المتداولة وقت البيع. وعليه بعد استيفاء
- Article 113
The article makes undue debts that are established against the debtor payable and due as soon as the liquidation procedure is opened.
تكون الديون غير الحالة الثابتة في ذمة المدين واجبة ومستحقة الأداء فور افتتاح إجراء التصفية.
- Article 116
The article governs the trustee's decision to distribute the proceeds of selling the estate assets to creditors, notice of it, objecting to it, and reserving amounts for debts in court dispute.
1- يصدر الأمين قراراً بتوزيع حصيلة بيع أصول التفليسة على الدائنين وفقاً لما تحدده اللائحة، ويتولى الأمين توزيع هذه الحصيلة على الدائنين مرة واحدة وفقاً لترتيب ا
- Article 187
The article provides that any secured financing the court approves is considered priority financing.
كل تمويل مضمون توافق عليه المحكمة يعد تمويلاً ذا أولوية.
- Article 188
The article prohibits automatic set-off after protective settlement and financial reorganization (and their small debtor versions) open, and allows the proposal to provide for set-off of specified mutual debts.
مع مراعاة أحكام الفصل (الرابع عشر) من النظام، تحظر المقاصة التلقائية بعد افتتاح أي من الإجراءات الآتية: أ - التسوية الوقائية. ب - إعادة التنظيم المالي. ج - التس
- Article 189
The article provides that the set-off prohibition does not affect calculating a creditor's claim for voting on the proposal, which is counted at what remains after deducting what the debtor is entitled to.
لا يؤثر الحظر المنصوص عليه في المادة (الثامنة والثمانين بعد المائة) من النظام في حساب قيمة مطالبة أي من الدائنين لغرض التصويت على المقترح، وتكون قيمة مطالبة الد
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.