Compromise

between Creditors and Debtor

COMPROMISE DEFINITION

Compromise in terms of Section 155 of the New Companies Act, a compromise can be reached with creditors to the effect that creditors write off a percentage of the amounts owing to them or grant an extension for repayment.

COURT ORDER

After a compromise has been reached, the compromise is made an order of court and the funds are distributed according to the compromise reached

EFFECT OF COMPROMISE

The effect of such a compromise is that there is a moratorium reached with creditors whereby all creditors are bound by the decision of a minimum of 75% of creditors.

COMPROMISE AFTER LIQUIDATION

A compromise reached after a company has been placed in liquidation has the effect that the company is taken out of liquidation by order of court should last-mentioned be specifically agreed upon as part of the compromise. The company in liquidation can immediately after the compromise is agreed upon, approach court for such an order.