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

==Start of PDF== Saudi Central Bank

Reference No.: 42066419 Date: 1442/09/20 (Hijri) Attachments: 6 pages

Circular

Respected Banks, Peace be upon you,

Subject: Instructions Clarifying Banking Obligations and Transactions Under the Bankruptcy Law and Its Implementing Regulations.

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

These instructions aim to clarify the obligations of banks and financial institutions under the provisions of the Bankruptcy Law and its Implementing Regulations, in addition to facilitating banking transactions related to bankruptcy procedures. Attached are the Instructions Clarifying Banking Obligations and Transactions Under the Bankruptcy Law and Its Implementing Regulations, which supersede the SAMA Circular communicated under Circular No. (41039914) dated 1441/06/08H.

For information and action, effective from the date of issuance. Yours sincerely,

[Signature] Fahd bin Ibrahim Al-Shathri Deputy Governor for Supervision

Distribution Scope:

• Banks and financial institutions operating in the Kingdom.

P.O. Box 2992, Riyadh 11169, Kingdom of Saudi Arabia | Phone: +966 11 463 2000

==Screenshot for page 2== Instructions Clarifying Banking Obligations and Transactions Under the Bankruptcy Law and Its Implementing Regulations (First Edition - April 2021)

Saudi Central Bank

==Screenshot for page 3== Table of Contents

Chapter	Page No.
Chapter One: Definitions and General Provisions	3
Chapter Two: Bank Obligations	4
Chapter Three: Banking Transactions Required by the Trustee or Committee	4

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==Screenshot for page 4== Chapter One Definitions and General Provisions

1. Definitions: 1.1. The terms and expressions used in these instructions shall have the meanings set forth opposite each of them in Article (One) of the Bankruptcy Law, issued by Royal Decree No. (M/50) dated 1439/05/28H, and Article (One) of its Implementing Regulations, issued by Council of Ministers Resolution No. (622) dated 1439/12/24H. 1.2. The terms and expressions listed below, wherever they appear in these instructions, shall have the meanings set forth opposite each of them, unless the context otherwise requires: SAMA: Saudi Central Bank. The System: The Bankruptcy Law. The Regulation: The Implementing Regulations of the Bankruptcy Law. Competent Court: The court before which the petition for opening a bankruptcy procedure is registered. Committee: The Bankruptcy Committee.

2. General Provisions: 2.1. These instructions aim to clarify the obligations of banks and financial institutions under the provisions of the System and Regulation, in addition to facilitating banking transactions related to bankruptcy procedures. 2.2. These instructions do not affect the provisions contained in the System and Regulation, as well as other related regulations and instructions, including (by way of example, not limitation) the following:

• Rules and Guide for Managing Distressed Loans, communicated via SAMA Circular No. (41033343) dated 1441/05/11H.
• Bank Accounts Rules, communicated via SAMA Circular No. (65681/67) dated 1440/11/01H.
• Rules Governing Bankruptcy Cases Procedures in Commercial Courts, issued by Minister of Justice Resolution No. (6421) dated 1441/03/21H.
• SAMA Circular No. (42025830) dated 1442/04/21H, regarding confirming the non-suspension of bank guarantee letters due to the opening of a bankruptcy procedure and suspending claims against the customer, subject to issuing the letter.
• SAMA Circular No. (42016471) dated 1442/03/16H, regarding the importance of observing systems related to the commercial environment and credit transactions.

==Screenshot for page 5== Chapter Two Bank Obligations

3. Banks and financial institutions, in their capacity as banking practitioners or creditors of the debtor, must comply with the following: 3.1. Enable the Trustee or Committee (as applicable) to access any information or procedures related to the debtor's transactions subject to financial restructuring, liquidation, small debtor financial restructuring, small debtor liquidation, or administrative liquidation, through various channels, in accordance with the provisions of Chapter Three of these instructions. 3.2. Comply with the suspension of claims against the debtor upon receiving confirmation from SAMA that the Competent Court has issued an order suspending claims, through official notification channels, the Trustee, or the debtor (as applicable), including debit and transfer orders from bank accounts based on court rulings issued after the suspension of claims, subject to the following:

• Comply with claim suspension within the periods specified for each procedure in the System, or until SAMA receives notice of lifting the suspension, taking into account any extensions by the Competent Court.
• The effect of claim suspension shall not extend to seizure and debit orders from bank accounts and transaction restrictions based on court rulings issued before the suspension of claims, unless a contrary order is issued by the Competent Court.
• Not affect relevant statutory provisions regarding enforcement on guarantees during the claim suspension period. 3.3. Submit the bank's claims to the Trustee or Committee (as applicable) within the specified time limit, clarifying their nature and attaching supporting documents. 3.4. Verify the powers and duties of the Trustee, and each individual Trustee if there are multiple, based on a ruling from the Competent Court. 3.5. Ensure that relevant departments and branches are aware of these instructions.

Chapter Three Banking Transactions Required by the Trustee or Committee

4. Bank Accounts: 4.1. A bank account shall be opened for the debtor subject to one of the bankruptcy procedures specified in paragraph (3.1), according to the following requirements:

1. A request submitted by the Trustee or Committee (as applicable) to open the account, specifying its purpose.

==Screenshot for page 6== 2. A ruling from the Competent Court including any of the following: a. Opening liquidation or small debtor liquidation for a natural or legal person and appointing one Trustee. b. Opening liquidation or small debtor liquidation and appointing more than one Trustee, specifying their duties and powers, including opening and managing bank accounts. c. Opening administrative liquidation and appointing the Bankruptcy Committee to manage the procedure. d. Restraining the debtor and entrusting the Trustee with managing activities in a financial restructuring procedure. 3. A copy of the Trustee's national ID, or a letter from the Committee containing details of the person authorized to manage the account in administrative liquidation, along with a copy of his national ID. 4. A copy of the commercial registration, memorandum of association, and its attachments for the legal entity subject to bankruptcy, or the national ID/residence permit for a natural person. 4.2. The Trustee or Committee may continue managing the debtor's bank accounts subject to one of the procedures specified in paragraph (3.1), according to the following requirements:

1. A ruling from the Competent Court including any of the following: a. Opening liquidation or small debtor liquidation for a natural or legal person and appointing one Trustee. b. Opening liquidation or small debtor liquidation and appointing more than one Trustee, specifying their duties and powers, including managing bank accounts. c. Opening administrative liquidation and appointing the Bankruptcy Committee to manage the procedure. d. Restraining the debtor and entrusting the Trustee with managing activities in a financial restructuring procedure.
2. A copy of the Trustee's national ID, or a letter from the Committee containing details of the person authorized to manage the account in administrative liquidation, along with a copy of his national ID. 4.3. A bank account shall be opened for the purpose of depositing bankruptcy sale proceeds securing the debtor's claim under financial restructuring or small debtor financial restructuring, according to the following requirements:
3. A request submitted by the Trustee to open the account, specifying its purpose and validity period, which shall not exceed the date of the Competent Court's ruling ending the procedure.
4. A ruling from the Competent Court for opening financial restructuring or small debtor financial restructuring for a natural or legal person, appointing the Trustee.
5. A copy of the Trustee's national ID.

==Screenshot for page 7== 4. Confirmation by the Trustee to notify the bank immediately upon the Competent Court's ruling of his dismissal or acceptance of his resignation, and enabling the new Trustee to continue managing the account after fulfilling the Competent Court's ruling appointing the new Trustee in place of the current one, along with a copy of his national ID.

5. Bank Statements for Ten Years: 5.1. The Trustee or Committee (as applicable) shall be provided with bank statements for the debtor subject to one of the procedures specified in paragraph (3.1), after fulfilling a ruling from the Competent Court including any of the following: a. Opening liquidation or small debtor liquidation for a natural or legal person and appointing one Trustee. b. Opening liquidation or small debtor liquidation and appointing more than one Trustee, specifying their duties and powers, including requesting bank statements. c. Opening administrative liquidation and appointing the Bankruptcy Committee to manage the procedure. d. Restraining the debtor and entrusting the Trustee with managing activities in a financial restructuring procedure.

6. The execution or provision of the transactions specified in paragraphs (4) and (5) shall not exceed the periods specified in the following table:

Paragraph	Period
Paragraph (4.1)	One business day from completion of requirements
Paragraph (4.2)	Upon completion of requirements
Paragraph (4.3)	One business day from completion of requirements (for account opening), and upon completion of requirements (for continuing account management)
Paragraph (5.1)	Seven business days from completion of requirements

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