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  • Instructions for Banking Obligations and Transactions in Accordance with the Bankruptcy Law and Its Implementing Regulations

    No: 42066419 Date(g): 1/5/2021 | Date(h): 20/9/1442Status: In-Force

    Translated Document

    Referring to the Bankruptcy Law, issued by Royal Decree No. (M/50) dated 28/05/1439 H, and its Implementing Regulations, issued by Council of Ministers Resolution No. (622) dated 24/12/1439 H, and acknowledging the important role of banks in implementing the bankruptcy law.

    To clarify the obligations of banks according to the Bankruptcy Law and its Implementing Regulations, as well as to facilitate banking transactions related to bankruptcy procedures, please find attached the instructions detailing banking obligations and transactions in light of the Bankruptcy Law and its Implementing Regulations. These instructions supersede SAMA instructions communicated by Circular No. (41039914) dated 08/06/1441 H.

    For your information, and to act in accordance with the instructions effective from this date.

    • Chapter Two: Obligations of Banks and Financial Institutions

      3.Banks and Financial Institutions, as operators of banking activities or creditors of the debtor, must adhere to the following:
       
      3.1Facilitate the provision of any information or procedures related to the debtor’s transactions subject to financial reorganization, liquidation, financial reorganization for small debtors, liquidation for small debtors, or administrative liquidation to the trustee or committee, as applicable, through various channels, in accordance with the provisions of Chapter Three of these instructions.
      3.2Adhere to the suspension of claims against the debtor immediately upon receiving proof of a court order from the competent court suspending claims. This should be done through official notification channels, the trustee, or the debtor—whichever is applicable— including debit and transfer orders from bank accounts in accordance with the judgments and decisions issued by the competent courts after the suspension of claims, with the following considerations:
        
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      		Adhere to the suspension of claims according to the timeframes specified for each procedure in the Law, or until the bank receives confirmation of the cancellation of the suspension, considering any extensions that may be granted by the competent court.
       
        
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      		The suspension of claims does not extend to attachment and debit orders from bank accounts and prohibitions on transactions based on judgments and decisions issued before the suspension of claims, unless otherwise directed by the competent court.
       
        
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      		Ensure compliance with relevant legal provisions regarding the enforcement on guarantees during the suspension of claims.
       
      3.3Submit the bank's claims to the trustee or committee—whichever is applicable—within the specified timeframe, detailing their nature and attaching supporting documentation.
      3.4Verify the powers and duties of the trustee, and each trustee individually if there are multiple, based on the competent court's ruling.
      3.5Ensure that employees in the relevant departments and branches are familiar with these instructions.

    • Chapter Three: Banking Transactions That May Be Required by the Trustee or Committee

      • 4. Bank Accounts

        4.1.A bank account must be opened for the debtor subject to one of the bankruptcy procedures outlined in Section (3.1) according to the following requirements:
         1. A request from the trustee or committee, as applicable, to open the account, specifying its purpose.
         2. A decision from the competent court including any of the following:
          A.The initiation of liquidation or liquidation for small debtors for the natural or legal person, and the appointment of a single trustee.
          B.The initiation of liquidation or liquidation for small debtors and the appointment of multiple trustees, specifying their duties and powers, including the opening and management of bank accounts.
          C.The initiation of administrative liquidation and the appointment of the Bankruptcy Committee to manage the procedure.
          D.The suspension of the debtor’s authority and the appointment of the trustee to manage the operations during financial reorganization proceedings.
         3. A copy of the trustee's national ID, or a letter from the committee containing the details of the person authorized to manage the account in administrative liquidation proceedings, along with a copy of their national ID.
         4. A copy of the commercial register, the founding contract, and its appendices for the legal entity subject to bankruptcy proceedings, or the national ID/residence permit for the natural person.
        4.2The trustee or committee must be enabled to continue managing the debtor's accounts subject to one of the bankruptcy procedures outlined in Section (3.1) according to the following requirements:
         1.A decision from the competent court including any of the following:
          A.The initiation of liquidation or liquidation for small debtors for the natural or legal person, and the appointment of a single trustee.   
          B.The initiation of liquidation or liquidation for small debtors and the appointment of multiple trustees, specifying their duties and powers, including the management of bank accounts.   
          C.The initiation of administrative liquidation and the appointment of the Bankruptcy Committee to manage the procedure.   
          D.The suspension of the debtor’s authority and the appointment of the trustee to manage operations during financial reorganization proceedings.   
         2. A copy of the trustee’s national ID, or a letter from the committee detailing the person authorized to manage the account in administrative liquidation proceedings, along with a copy of their national ID.
        4.3A bank account must be opened for the purpose of depositing the proceeds from the sale of the bankruptcy assets securing the debtor’s debt subject to financial reorganization or financial reorganization for small debtors, according to the following requirements:
         1.A request from the trustee to open the account, specifying the purpose and the account’s validity period, which should not exceed the date of issuance of the competent court’s judgment to conclude the proceedings. 
         2.A decision from the competent court initiating the financial reorganization or financial reorganization for small debtors for the natural or legal person and appointing the trustee. 
         3.A copy of the trustee’s national ID. 
         4.The trustee’s acknowledgment to notify the bank immediately upon the court’s decision regarding their dismissal or acceptance of their resignation, and to enable the new trustee to continue managing the account, following the court's decision appointing the new trustee in place of the current trustee, along with a copy of their national ID. 

      • 5. Bank Account Statements for a Period of Ten Years

        5.1The trustee or the committee—depending on the circumstances—shall be provided with the bank account statements of the debtor subject to one of the bankruptcy procedures specified in paragraph (3.1), after fulfilling the decision of the competent court containing any of the following:
          A.The initiation of liquidation or liquidation for small debtors for the natural or legal person and the appointment of a single trustee.
          B.The initiation of liquidation or liquidation for small debtors and the appointment of multiple trustees, specifying their duties and powers, including the request for bank account statements.
          C.The initiation of administrative liquidation and the appointment of the Bankruptcy Committee to manage the procedure.
          D.The suspension of the debtor’s authority and the appointment of the trustee to manage operations during financial reorganization proceedings.

      • 6. The Execution or Submission of the Transactions Outlined in Sections (4) and (5) Should not Exceed the Timeframes Specified in the Following Table

        Section

        Timeframe

        Section (4.1)One business day from the completion of requirements.
        Section (4.2)Immediately upon completion of requirements.
        Section (4.3)One business day from the completion of requirements (for opening the account), and immediately upon completion of requirements (for continuing account management).
        Section (5.1)Seven business days from the completion of requirements.