Three procedures shall apply in accordance with the bankruptcy regime in case of faltering, bankruptcy, or in case of expected bankruptcy or faltering:
1/Financial reorganization
2/liquidation
3/Preventive settlement, which is the focus of our conversation
The bankruptcy system issued in 2016-1439H incorporated various bankruptcies and identified the systemic tools needed to restructure the debtor’s business one of these tools is the preventive settlement procedure, which is one of the most important because it aims to facilitate the debtor’s agreement with its creditors to settle its debts and the debtor retains the management of its activity, It also promotes the investment environment and enables the debtor or the debtor, or who is expected to suffer from financial disruption, to take advantage of bankruptcy proceedings to regulate its financial situation, restore its activity and contribute to the economy’s support and development.
Meaning of preventive settlement:
Voluntary plan submitted by the debtor in certain cases of the competent court that includes a request for a preventive settlement between the debtor and its creditors within a specified period of time if the quorum requested of the different categories of creditors votes on the settlement proposal and the Court ratifies the opening of this procedure if certain conditions set forth in the draft regulations are met, or reject it in certain cases, and if the court certifies the procedure it becomes binding on all creditors, Without prejudice to the Debt Settlement Proposal, the debtor’s hand shall not forgo the conduct of its activities for the duration of this proceeding.
There is a preventive settlement, and there is a preventive settlement for small debtors:
A preventive settlement procedure in the case where the debtor’s total debt exceeds SAR 2 million. The preventive settlement procedure for small debtors is not exceeding SAR 2 million because it is considered a small, low cost and high efficiency debt within a reasonable time and through simple procedures.
The cases in which the debtor is entitled to request that this procedure be opened in accordance with article 13 are:
- If he is likely to suffer from financial or economic turmoil, he fears that he will stop paying his debts when it comes to repayment.
- If he is in distress.
- If he is bankrupt.
Article 15 of the Regulations set out the Tribunal’s powers to request the opening of this procedure, its acceptances, which are found to be bankrupt, obstructed or fearful of future financial disruption, the provision of relevant information and documentation, and careful classification of creditors into more than one category fairly.
The same article also indicates in paragraph (b) the cases of refusal: if the application does not meet the statutory requirements or is incomplete without admissible justification, or if the applicant acted in bad faith or his request involved abuse of the procedure or committed any of the offences established in chapter XIII of the Regulations or if, on the basis of information and documentation provided by the debtor, the court deems it appropriate to open another proceeding, If the court rejects the application, it may order the opening of the appropriate bankruptcy proceeding.
The preventive settlement procedure is distinct from other bankruptcy proceedings; should be effected within a reasonable period of time, and that was what the Rules stipulated was that requests for settlement should be expedited.
What is the point of the debtor’s application to open this proceeding?
1/To assist the debtor to return to its economic activity as soon as possible and to give the debtor the opportunity to remedy its position with its creditors by protecting it from any conduct of creditors towards its assets within a specified period.
Raising the debtor’s repayment rate to support economically viable projects when exposed to a financial stump without prejudice to creditors’ rights.
Suspending the enforcement of secured creditors’ rights over their rights to the detriment of the debtor and the rest of the creditors.
4/There is an opportunity for the debtor to continue the activity to obtain better returns.
5/The debtor retains the administration of its activity
We know that the debtor is entitled to submit a preventive settlement request, but can the creditor make the settlement request?
This procedure is a voluntary right of the debtor and may not be requested by a creditor. If the application exists and the creditor’s debt is not included in the proposal, the creditor submits its claim to the Secretary or the Bankruptcy Committee within 14 days of the opening of the proceeding by requesting that its claim be included in the proposal.
ndicative card to meet the requirements of the Regulation of Information and Documentation for opening the preventive settlement procedure for small debtors:
Submitted by the debtor
Indicative card to meet the requirements of the Information and Documentation List for opening the preventive settlement procedure:
Submitted by the debtor
At Abdul Ellah Al Humaidi , we also provide Bankruptcy-Preventive Settlement
by communicating :
Number: 0504328584 Or e-mail: Info@lah.sa