A Part XIV compromise gives an opportunity for an insolvent company to survive. Although the company may not be able to pay back its debt in full, it allows the company to provide ongoing business to creditors and a chance to save a good business trapped in an insolvent company.
A compromise is an agreement, between the creditors and the Company once it is accepted by the creditors. The two main elements of most compromises allow:
- The debtor to pay back their debt in part or full over a defined period. If it is agreed that the debtor will pay in part, the remaining debt is written off.
- Debts to be frozen, and any legal action against the company regarding the debt is suspended during compromise
- Appointment of a Provisional Trustee
The Individual appoints a Provisional Trustee to manage their affairs and the Court is notified that a compromise is being put forward.
- Compromise to Creditors
The Provisional Trustee prepares and distributes the compromise to all the creditors.
- Creditors Meeting
A creditors meeting is called, and the compromise is voted on.
- Approval by the Court
Once the compromise is approved by the creditors, it is then put before the Court for its approval. The Court is also asked to confirm the Provisional Trustee.
- Distribution Under Compromise
The trustee then makes the distributions to the creditors as per the compromise.
Requirement to Accept Compromise
Once the compromise is put to the creditors for consideration, the creditors must vote to approve the compromise. For the compromise to be accepted there must be a majority in number and 75% in value of the creditors voting either in person, proxy or postal vote.
Putting a Compromise together that will satisfy both the creditors and the individual is not an easy task. With the only in-house legal team and over ten years of experience in the industry, Waterstone can carry out Part XIV Compromises in an effective, cost-efficient manner.