The restructuring market in Saudi Arabia is new and began with the entry into force of the Bankruptcy Regulation on 22 August 2018. Previous legislation was basic and not applied properly. The Bankruptcy Regulation has established the Bankruptcy Commission, which is supervised by the Minister of Commerce and Investment and has several specified powers, such as officeholder licensing, rule-making, and inspection and investigation, among others. The Commission maintains a register of documents and information in respect of bankruptcy procedures, and publishes announcements on its website. Bankruptcy proceedings come under the jurisdiction of the Commercial Court, except in some provincial towns where they are administered by the general courts.
According to the Bankruptcy Register, 230 proceedings have been approved under the Regulation since January 2019. The ratification on 15 September 2021 of Ahmad Hamad Algosaibi & Bothers’ financial reorganisation proposal, in proceedings that commenced in May 2019, has received wide international attention. Under the proposal, more than 100 banks and other creditors are meant to receive USD1.9 billion in settlement of USD7.3 billion debts. Meanwhile, the liquidation of construction giant Saudi Oger, which started in February 2020, is ongoing.
The Bankruptcy Regulation was enacted by Royal Decree No M/50 of 14 February 2018, and its Implementing Rules were issued on 4 September 2018. Their 329 articles aim to set out a comprehensive code governing insolvencies, and are supplemented by various statutory instruments issued by the Ministry of Commerce, the Ministry of Justice and the Bankruptcy Commission, including:
The legislation sets out the following procedures.
A protective settlement procedure is intended to facilitate an agreement by the debtor with their creditors for the settlement of their debts, in which the debtor retains the management of their activities under the Commercial Court’s supervision. The applicant must submit a proposal to the court, which must be voted on by the creditors within 80 days. The applicant may apply to the court for an order suspending claims for up to 90 days, which may be extended by another 90 days. Once a proposal is ratified, it becomes a scheme. Upon successful implementation of the scheme, the debtor can return to managing their affairs.
A financial reorganisation procedure is intended to facilitate an agreement by the debtor with their creditors for the financial reorganisation of their activities under the supervision of one or more trustees in bankruptcy. On the opening of the procedure, all claims against the debtor are automatically suspended for up to 180 days, which may be extended by another 180 days. Creditors have 90 days from the announcement of the procedure to submit their claims to the trustee. When the recognised claims are ascertained, the court must set a time limit for the preparation of a proposal by the debtor with the trustee’s assistance. If accepted by a majority of the creditors and ratified by the Commercial Court, the proposal becomes a scheme, following the successful implementation of which the debtor can return to managing their affairs unsupervised.
In a liquidation procedure one or more liquidation trustees list creditors’ claims, sell the bankruptcy assets and distribute the proceeds to the creditors under the court’s supervision.
In an administrative liquidation procedure, the debtor’s bankruptcy assets are sold where such assets are insufficient to cover the expenses of the liquidation procedure or small debtor liquidation procedure, under the management of the Bankruptcy Commission.
The Regulation also includes a specialised protective settlement procedure, financial reorganisation procedure and liquidation procedure for small debtors, which are largely analogous to the above procedures in simplified form, with the same purposes.
Article 150 of the Companies Regulation requires any official or auditor of a joint stock company to notify the chairman as soon as he or she becomes aware that the company’s losses have reached one half of its capital. Thereafter, the chairman must notify the board of directors, who must summon an extraordinary general meeting to convene within 45 days from the date of their knowledge of the losses, to resolve whether to increase the capital of the company, or to reduce it, to a limit whereby the proportion of the losses would be reduced to less than one half of the paid-up capital, or to dissolve the company before the time specified in the bylaws. If no extraordinary meeting is convened within the prescribed period or such meeting fails to reach a conclusion, the company is deemed to have expired by law. Similar provisions governing limited liability companies are set out in Article 181 of the Companies Regulation. Failure to act as required by Article 150 or 181, as appropriate, exposes a company’s officers, shareholders and auditors to liability for losses suffered by the company or third parties as a result of their inaction.
Article 200 of the Bankruptcy Regulation makes it unlawful for debtors or their officers to continue a debtor’s activities in the absence of a possibility of avoiding liquidation, or to delay the opening of a liquidation procedure, which may result in imprisonment for up the five years and a fine of up to USD1.33 million.
A financial reorganisation procedure or liquidation may be initiated by a debtor, a creditor or a competent authority.
An application to open a financial reorganisation procedure requires the applicant to demonstrate that it is probable that the debtor will suffer financial disruptions giving rise to risk of a default, or that they are in default, or that they are bankrupt.
An application to open a liquidation requires proof that the debtor is in default or bankrupt.
The Bankruptcy Regulation defines a defaulter as “a debtor who has failed to pay a debt claimed from him at the maturity date”, while a bankrupt is defined as “a debtor whose debts absorb the whole of his assets”.
Bankruptcy proceedings of regulated entities may only be opened with the concerned regulator’s consent. Article 3.1 of the Bankruptcy Regulation defines regulated entities as follows:
Article 2 of the Implementing Rules has added the following to this list:
The Bankruptcy Regulation provides that the concerned regulators may issue rules which exempt entities which are under their supervision from the application of specific rules of the Bankruptcy Regulation, or impose additional requirements.
Since there was no comprehensive legislation in Saudi Arabia governing restructurings prior to the entry into force of the Bankruptcy Regulation, until very recently consensual and other out-of-court workouts and restructurings were the default mode of dealing with insolvent creditors. One must also bear in mind that Saudi Arabian statute law introduced the concept of mortgages over land as recently as 2012 through the Registered Land Mortgage Regulation. Before then, banks lending money for the purchase of real property would normally take ownership of the property and transfer ownership to the borrower only when the loan was repaid.
There still is a general perception in Saudi Arabia that consensual, non-judicial or other informal restructuring processes are preferable to statutory processes and tend to preserve value for stakeholders. Generally, banks and other lenders are supportive of borrower companies experiencing financial difficulties pending a detailed assessment of their financial position.
Mandatory consensual restructuring negotiations are not required under Saudi Arabian law before the commencement of formal bankruptcy procedures.
The use of consensual "standstills" is limited in Saudi Arabia. Credit agreement default waivers as part of an initial informal and consensual process are more common but are carried out on an ad hoc basis with the timeline usually being a minimum of about one year. Legislation permitting liens/security is recent, and contractual priority and security/lien priority is changed by either being contractually established and/or being registered/perfected. Equity-holder and intercompany (entity) priority rights are contractually subordinated and often not provided with priority and/or security/lien priority. Generally, the relative positions of competing creditor classes remain the same and equity-owners are subordinated without priority and/or security/lien priority.
New money is typically injected by the equity owners. Since there are no super-priority liens or rights under Saudi Arabian legislation, such liens or rights are not accorded to new-money investors outside of a statutory or other formal process.
It is an offence for anyone to submit misleading or incorrect information in any form to the trustee in bankruptcy, the court or the Bankruptcy Commission, or to fail to submit material information to them, if this causes prejudice to the rights of any parties, including the creditors. The Bankruptcy Regulation also makes it an offence for creditors to fraudulently inflate the value of their claims, to knowingly make arrangements with the debtor that are prejudicial to the interests of the other creditors, or to otherwise abuse any bankruptcy procedures. Penalties are imprisonment for up to five years and a fine of up to USD1.33 million.
Credit agreements in Saudi Arabia typically contain terms permitting a majority or super-majority of lenders to bind dissenting lenders to changed credit agreement terms. Informal consensual processes without a credible cram-down feature to deal with dissident creditors are perceived as unworkable. A formal statutory process was clearly needed to bind dissenters, and the enactment of the Bankruptcy Regulation was partly prompted to fill this void in Saudi Arabian law.
Mortgages can be taken by secured creditors over real estate. Pledges can be taken by secured creditors over equity shares, movable property and certain intellectual property. Security by way of assignment can be taken by secured creditors over certain intangible property. A pledge can be taken and perfected by taking possession of bank accounts.
Secured creditors may not enforce their rights outside bankruptcy proceedings once these have commenced. Creditors claiming security rights over the debtor’s assets must specify details of such rights in the claim submissions.
Secured assets must be sold by the trustee in bankruptcy and the proceeds must be deposited in a separate account for payment of the creditor’s debt in accordance with the ranking of its security. The trustee may also ask the Commercial Court to substitute and vary security over assets, provided the creditor’s rights are preserved.
If there are creditors whose claims are of a different nature, they must be classified into different categories. The Bankruptcy Regulation states that the manner in which claims categories are classified shall be provided for in the Implementing Rules, but these do not set out any relevant provisions. No uniform practice has evolved to date, and there are many ways in which creditors have been classed. One can use the list of priority of debts in a liquidation procedure set out in Article 196 of the Bankruptcy Regulation as guidance (see 5.5 Priority Claims in Restructuring and Insolvency Proceedings), but this is not mandatory in a protective settlement procedure or financial reorganisation procedure, nor is it commonly used in such procedures.
There are no protections of unsecured trade creditors, who are treated as ordinary creditors without special privileges, other than the general principle of fairness (see 6.12 Restructuring or Reorganisation Agreement).
Unsecured creditors have the right to vote in a protective settlement procedure, and if more than one third by value of their claims refuse the proposal, the procedure is terminated.
Unsecured creditors also vote in a financial reorganisation procedure, but their veto right may be overridden by the Commercial Court if at least one category out of the categories of creditors accepts the proposal by a two thirds majority, and there is a vote in favour by creditors whose claims represent at least 50% of the total value of the voting creditors’ claims of all categories, subject to the court being satisfied that ratification of the proposal would be in the interests of a majority of the creditors.
Unsecured creditors cannot stay or defer a liquidation unless they can demonstrate to the Commercial Court that general principles of fairness have not been observed (see 6.12 Restructuring or Reorganisation Agreement).
Pre-judgment attachments are generally available under Saudi Arabian law, but once bankruptcy proceedings are commenced, the attaching creditor’s rights are subject to the procedure and cannot be enforced while claims are suspended. In bankruptcy proceedings, the Commercial Court may order preservatory measures of its own motion or on the application of an interested party, including the attachment of the debtor’s assets.
Article 196 of the Bankruptcy Regulation sets out the priority of debts in a liquidation procedure, namely:
Financial restructuring can be achieved under a protective settlement procedure or financial reorganisation procedure. The key to both procedures is a proposal that must be approved by a majority of the creditors and then ratified by the Commercial Court. Creditors whose claims are of a different nature must be classified into different categories.
Acceptance of the proposal in a protective settlement procedure requires approval by each category of creditors representing two thirds of the value of the debts voting in that category, and an overall majority of one half of the value of total debts owed to unrelated parties. Therefore, if more than one third of creditors in one category reject the proposal, the process is terminated. Furthermore, the court must be satisfied that the proposal is fair (see 6.12 Restructuring or Reorganisation Agreement). Subject to these requirements, the proposal is binding on all creditors, including those who have objected.
Similar principles apply in a financial reorganisation procedure, subject to the Commercial Court having the discretion to ratify a proposal if at least one category out of the categories of creditors accepts the proposal by a two thirds majority, and there is a vote in favour by creditors whose claims represent at least 50% of the total value of the voting creditors’ claims of all categories, subject to the court being satisfied that ratification of the proposal would be in the interests of a majority of the creditors.
Unsecured creditors cannot stay or defer a liquidation unless they can demonstrate to the Commercial Court that general principles of fairness have not been observed (see 6.12 Restructuring or Reorganisation Agreement).
Voting in a protective settlement procedure is meant to be concluded within not more than 80 days from opening of the procedure. In practice, the period from opening of protective settlement procedures to ratification by the Commercial Court has varied from 54 days to 179 days, with an average of 93 days. Financial reorganisation procedures take considerably longer. For example, it took two and a quarter years from the opening of the financial reorganisation of Abdul Hamad Algosaibi & Brothers to ratification of the proposal, while the financial reorganisation of Saad Trading was opened in February 2019 and no proposal has been submitted to date. These delays in financial reorganisation procedure are not unusual.
The applicant in a protective settlement procedure must submit the proposal with the application to open the proceedings, and the creditors are therefore meant to be known from the outset. If ascertained creditors have not been included in the process, they can void the proceedings on the basis of misconduct on the debtor’s part. The rights of unascertained creditors who have not been included in the procedure remain unaffected and can be pursued against the debtor.
In a financial reorganisation procedure, an announcement is made by the trustee in bankruptcy, and creditors have to submit their claims. Those who fail to do so lose their rights against the debtor.
In a protective settlement procedure, disputed claims must be assessed by an expert, while the trustee assesses disputed claims in a financial reorganisation procedure. An objection to their ruling can be made to the Commercial Court by the creditor, the debtor or other parties who are affected, such as other creditors, and the court’s ruling can be appealed. A final ruling makes the concerned creditor’s claim res judicata. The process can take several years.
A stay of proceedings must be applied for in a protective settlement procedure, and cannot be effective for more than 180 days. The company’s management remains in place and continues its operations under the court’s supervision. The debtor may apply to the court to terminate contracts to which the debtor is a party if this is necessary to protect their activity and in the interests of the majority of creditors, provided that it does not result in major damage to the counterparty. The debtor may obtain financing under the court’s supervision.
In a financial reorganisation procedure, a stay of proceedings for 180 days is automatically applied once the procedure starts, and may be extended by another 180 days. A trustee in bankruptcy is appointed to supervise the management, and may dismiss them and take over their functions if they are uncooperative or incapable of performing their functions satisfactorily. The trustee may terminate contracts and obtain financing subject to the same rules as apply in protective settlement procedures.
The Bankruptcy Regulation states that the manner in which claims categories are classified shall be provided for in the Implementing Rules, but these do not set out any relevant provisions. The list of priorities of debts in liquidation procedures offers some guidance (see 5.5 Priority Claims in Restructuring and Insolvency Proceedings), but no uniform practice of classification has evolved to date.
In a financial reorganisation procedure, the court may set up a committee made up of at least three creditors who have claims in respect of unsecured debts that have been accepted by the trustee. The creditors’ committee’s functions include approving the sale of any asset whose value exceeds one quarter of the value of the assets in bankruptcy, but otherwise are mainly advisory.
Article 10 of the Implementing Rules provides that creditors have the right to access information and documents in the trustee’s or the Bankruptcy Commission’s possession, unless the trustee considers certain documents confidential in order to preserve assets and to facilitate a procedure. In practice, however, only creditors whose claims have been recognised by the trustee in bankruptcy are permitted to inspect such documents. In the instances when our firm was deemed entitled to access information, we had to attend at a trustee’s offices and read the documents on a computer without being permitted to make copies.
Creditors have the right to lodge an objection with the Commercial Court if they are of the view that their interests are not taken into consideration in the proceedings. It is an overriding principle of the Bankruptcy Regulation that creditors’ rights are safeguarded in a fair manner and that they are fairly treated (see 6.12 Restructuring or Reorganisation Agreement).
The Bankruptcy Regulation contains no provisions in respect of trading of claims.
Bankruptcy proceedings must ordinarily be commenced on behalf of individual juristic persons, but the Commercial Court has approved the opening of procedures in respect of groups of companies. It should be possible in principle to restructure a group, provided the Commercial Court and the majority of creditors agree.
Article 70 of the Bankruptcy Regulation provides that, in a financial reorganisation procedure, the debtor must obtain the trustee’s written consent before taking any of the following steps:
No corresponding restrictions are imposed in respect of protective settlement procedure, but debtors are under the general duty to safeguard the creditors’ rights in a fair manner. Furthermore, the sale of assets at less than their market value or making deals for unfair consideration in the course of bankruptcy proceedings is an offence punishable with imprisonment of up to five years or a fine of up to USD1.33 million.
The sale of assets in a financial reorganisation procedure is executed by the managers of a business under supervision of the trustee in bankruptcy. If the procedure is followed, a purchaser acquires good title free and clear of claims. The sale of assets may be conducted by public auction, at which creditors may bid. Provided the trustee in bankruptcy is informed and the transaction is in the interest of all creditors, sales and similar transactions that have been pre-negotiated prior to the proceeding can be affected.
Under Article 72 of the Bankruptcy Regulation, the trustee may submit to the Commercial Court an application for approval of the substitution of a security provided to a creditor by another security equivalent to it, if the same would be in the interests of the majority of creditors. Under Article 75.4, the trustee may submit to the court an application to approve inclusion in the proposal of an item varying any security if the same is necessary in order to implement the proposal, and provided that that same item shall include material to show that the secured creditor who is affected will receive equivalent security for his original security. Once the proposal is ratified, the trustee must sell the secured assets under the court’s supervision and, after collecting his fees and costs of sale, deposit the balance of the proceeds of sale in a separate current account for payment of the secured creditor’s debt in accordance with the ranking of his security, and if the amounts deposited in the current account are in excess of the amount of the secured debt, the trustee must deposit such surplus in the debtor’s account.
Secured financing requires an expert’s report confirming that it is necessary for a continuation of the debtor’s activity or the preservation of assets. Unsecured financing may be obtained without the court’s consent. Secured financing that is obtained with the court’s approval has priority ranking.
The parties in bankruptcy proceedings must act in good faith and must, therefore, determine the value of claims in good faith. Therefore, in theory there should be no disagreement over the value of claims, but this is far from reality in actual bankruptcy proceedings.
Where debts are disputed in a protective settlement procedure, an expert must determine their value. The trustee in bankruptcy must determine the value of disputed debts in financial reorganisation procedures, and may request the assistance of an expert in appropriate circumstances. Any party with an interest may lodge an objection with the Commercial Court to the expert’s or trustee’s determination, and the court’s decision may be appealed to the Court of Appeal. Such proceedings can take several years.
All proposals that have been accepted by a majority of creditors must be ratified by the Commercial Court, subject to the overriding requirement of fairness based on the following criteria:
The Bankruptcy Regulation does not address the release of non-debtor parties from liabilities.
Automatic set-offs cannot be invoked in protective settlement procedures or financial reorganisation procedures. Proposals in such proceedings may provide for a set-off against specified debts, if they are between the same parties and they have the same capacities and rights with regard to those debts or transactions. The opening of any liquidation procedure results in an automatic set-off in respect of any debt owed to the debtor by the creditor on the date of opening.
A scheme is binding on the debtor, creditors and shareholders. Failure by the debtor or a creditor to comply with the scheme allows a party with an interest to apply for termination of the process, in which case the court may move to liquidation of the debtor’s assets on its own motion or on application by an interested person.
Shareholders’ rights remain unaffected unless a business is terminated in the course of a liquidation. If a proposal contains anything that affects shareholders’ rights, the debtor must summon them to vote thereon before the creditors’ vote is held.
A debtor, a creditor or competent authority may apply for the opening of the debtor’s liquidation if the debtor is in default or is bankrupt. To qualify as a debt in a liquidation, it must be immediately payable and in a definite amount, and due under a final and enforceable judgment or arbitration award, a settlement agreement endorsed by a court, a negotiable instrument, or a notarised contract or instrument. The Commercial Court may refuse to open a liquidation procedure if it appears probable that it is possible for the debtor’s activity to be continued and for creditors’ claims to be settled within a reasonable period. If the debtor’s assets are insufficient to cover the cost of a liquidation, the court may order the opening of an administrative liquidation, in which the Bankruptcy Commission conducts the sale of the debtor’s assets and distributes the proceeds to the creditors.
Following the opening of a liquidation procedure, a liquidation trustee is appointed and is put in charge of managing the debtor’s business. The trustee has the power to obtain information and documents relating to the liquidation procedure, including among other things, the debtor’s banking and investment documents.
Creditors are required to present claims to the trustee within 90 days of the announcement of the opening order in order to vote on the liquidation procedure proposal, but when a protective settlement procedure or financial reorganisation procedure is terminated and a liquidation procedure commences, claims that have already been filed and accepted do not need to be presented again.
The trustee is required to submit a progress report to the court every three months, to which the creditors have access.
The trustee may, after the rights of the creditors have been satisfied, and at the request of the debtor, apply to the court to defer the termination of the liquidation procedure.
The trustee is in charge of the bankruptcy assets, the procedures for the sale of such assets and the verification of claims, and may take such steps as they think fit to sell the assets at the best price possible with the proceeds of the sale deposited in a current account. The trustee is required to provide to the Commercial Court an inventory of the assets in bankruptcy with relevant details of such assets. The court will require the prior announcement of the sale of certain assets, and specified prior voting and notice requirements are applicable to the sale of any asset valued at over one quarter the value of the bankruptcy assets. The trustee requires the court’s consent to sell a bankruptcy asset that is disputed.
The trustee must make a decision for the distribution of the proceeds of sale of the bankruptcy assets to the creditors, and is in charge of the distribution of such proceeds in one or more lots in accordance with their ranking. Article 196 of the Bankruptcy Regulation sets out the priority of debts in a liquidation (see 5.5 Priority Claims in Restructuring and Insolvency Proceedings). The Regulation includes mechanisms for handling, among other things, satisfactions by guarantors and other persons of part of the debt owing to a creditor, debts not immediately payable, and the termination of debtor employment contracts. The trustee must return to the debtor any of the proceeds of the liquidation remaining after satisfying all of the debts.
In a liquidation procedure, a creditors’ committee may be set up under the same rules as in a financial reorganisation procedure (see 6.1 Statutory Process for a Financial Restructuring/Reorganisation). The trustee must summon creditors to a meeting to discuss and vote on decisions in situations in which he deems it necessary to obtain their consent, including several situations set out in the Bankruptcy Regulation, with decisions deemed valid if satisfying specified voting requirements.
The trustee must notify any creditor whose claim is recommended for dismissal or referred to an expert, with such a creditor having the right to apply to the Commercial Court for his claim to be heard.
The Regulation includes mechanisms for handling creditor objections to the trustee’s decision subject to specified time limits, retention by trustee of amounts to cover debts subject to judicial dispute, the apportioning of proceeds in the event there is more than one decision and a creditor submits a claim before the final decision, the payment of claims submitted after implementation of the final decision and before termination of the liquidation procedure, and the distribution of non-cash assets to creditors.
The Implementing Rules of the Bankruptcy Regulation provide that the Minister of Commerce and Investment and the Minister of Justice shall issue rules regulating cross-border bankruptcy procedures, but no such rules have been published to date, nor are we aware of a judicial practice in this respect.
There is no legislation governing the entering into protocols or other arrangements with foreign courts to co-ordinate proceedings, nor are we aware of a judicial practice in this respect.
The concept of private international law, or conflict of laws, has practically no application under Saudi Arabian law. Therefore, whenever a Saudi Arabian court or judicial tribunal is properly seized of a dispute, the case will be decided only in accordance with Saudi Arabian law, even if a contract is expressed to be governed by the laws of a country other than the Kingdom of Saudi Arabia.
The Bankruptcy Regulation does not differentiate between domestic and foreign creditors. In practice, the Commercial Court affords the same rights to foreign creditors as it does to domestic creditors.
The only international treaties on the reciprocal enforcement of judgments to which Saudi Arabia is a party are the Arab League Treaty on the Enforcement of Judgments signed at Riyadh on 16 April 1983 and the Arab Gulf Co-operation Council Convention on the Enforcement of Judgments of 6 December 1995.
Traditionally, Saudi Arabian courts have refused to recognise judgments issued in jurisdictions which do not have treaties on the reciprocal enforcement of judgments with the Kingdom, most recently in 2018 in relation to a judgment issued in England. Although the relevant regulations provide that judgments must be enforced on the basis of reciprocity, this has been interpreted to mean that the judgment was issued in a jurisdiction that is party to a treaty or convention for the reciprocal enforcement of judgments to which Saudi Arabia is also a party, or whose authorities would give executive force to judgments of the courts of Saudi Arabia without the requirement of instituting an action on the judgment.
The following officers are licensed by the Bankruptcy Commission.
Trustees must exercise due care with regard to the interests of the creditors, but are not liable for the consequences of any of the debtor’s actions which they have approved in a financial reorganisation procedure (see 6.3 Roles of Creditors) nor in connection with disposals in a liquidation. Trustees have a duty to inform the competent authorities if they suspect that the debtor or a creditor has committed offences under the Bankruptcy Regulation.
When selecting trustees, the court must have regard to their financial capabilities and qualifications, and the qualifications of their team. A creditor, relative, former partner, employee, auditor or agent of the debtor cannot be appointed as a trustee or expert. The Bankruptcy Commission’s Rules for the Nomination of Trustees and Experts impose additional criteria for the selection of trustees and experts, including the type of function, and the degree of complexity, and previous and current tasks performed by them. A trustee or expert may not discontinue their task without lawful cause that is acceptable to the court.
A company’s officers owe duties to creditors once debts exceed 50% of the capital, and may be subject to criminal sanctions if they continue the business activities in the absence of a possibility of avoiding liquidation (see 2.3 Obligation to Commence Formal Insolvency Proceedings). Furthermore, liquidation of an insolvent company other than under the Bankruptcy Regulation makes the officers liable for any shortfall suffered by the creditors. The officer’s duties under the Companies Regulation cease if a financial reorganisation procedure has been registered in a timely manner, but continue if the court dismisses or terminates the procedure.
Officers are subject to criminal sanctions for a number of transgressions committed before the opening of bankruptcy proceedings, including:
Once bankruptcy proceedings have commenced, an officer is criminally liable for the following acts or omissions:
Any of the above may result in imprisonment for up to five years and a fine of up to USD1.33 million. In addition, the court may make an order, on the application of any person having an interest, for one or more of the following:
Creditors and any other person having an interest may lodge a direct claim against the debtors’ officers in respect of the offences and liabilities listed in 10.1 Duties of Directors.
Any interested party may apply for nullification of a transaction made by the debtor prior to the opening of bankruptcy proceedings involving one or more of the following:
The complaint must be made within 24 months from the date of opening the procedure.
The look-back period is 24 months in respect of transactions with related parties, and 12 months in respect of transactions with unrelated parties.
Complaints in respect of defeasible transactions may be brought by any party having an interest.