Article 94 of the Saudi Bankruptcy Law

المادة 94 من نظام الإفلاس · الفصل الخامس: إجراء التصفية: طلب افتتاح إجراء التصفية

A creditor's request to open liquidation is not registered if the debtor disputed the debt before the request, and filing it despite proof of the dispute is an abuse of the procedure.

Official text (Arabic)

This article has not been amended since the law was issued.

لا يقيد طلب الدائن بافتتاح إجراء التصفية إذا كان المدين قد نازع الدائن في الدين قبل تقدم الدائن بالطلب. ويعد طلب الدائن افتتاح الإجراء مع وجود ما يثبت منازعة المدين للدائن في مطالبته إساءة استغلال لإجراء التصفية.

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 94 explained in plain English

This article protects the debtor from the liquidation procedure being used as a means of pressure over a disputed debt.

The first rule: A creditor's request to open the liquidation procedure is not registered if the debtor disputed the debt with the creditor before the creditor filed the request. What counts is that the dispute came before the request was filed.

The second rule: If the creditor files a request to open the procedure when there is proof that the debtor disputed its claim, that is considered an abuse of the liquidation procedure.

The idea is that the liquidation procedure was set up to deal with a distressed or bankrupt debtor, not to settle a disagreement over whether a debt exists or how much it is. This rule is therefore consistent with Article 93, which requires of a creditor's request, among other conditions, that the creditor prove it demanded payment from the debtor 28 days before the request was registered and that the debtor neither paid nor disputed the debt.

The article itself does not specify the consequences of abuse, but only describes the act in this way. It is followed by Article 95, which governs notifying the debtor of the request and its right to object to it.

To assess a particular situation, consult a lawyer specializing in bankruptcy and commercial cases.

Practical example

A contractor in Dammam demanded an amount from a company that he believes is due to him, and the company replied in writing that the work was not carried out under the contract and that it does not acknowledge the amount. If the contractor then files a request to open the liquidation procedure for the company, his request is not registered because the company disputed the debt before the request, and filing it despite proof of this dispute is an abuse of the procedure.

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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