Section 73 Proposal Explained in more detail
The Section 73 Proposal has two different Categories:
- When a company declares bankruptcy, the company may propose a composition. A composition is an agreement to pay funds into the administration, which will then be available to pay creditors.
- Scheme of arrangement–involves consideration, which includes payment of funds from the bankrupt to creditors and the sale/transfer of the property.
In order to be accepted by creditors, the Section 73 proposal must be passed by a special resolution. This means a majority of the vote greater than 75 percent in value must be reached, and more than 50 percent of those voting must support the proposal. If accepted by creditors, the individual will be annulled from bankruptcy.
The Section 73 Proposal can be terminated in the following ways:
- If a bankruptcy debtor fails to fulfill the terms of an approved reorganization plan, creditors or trustee can terminate it.
- The Court must authorize the composition of debts. This is due to the fact that a composition cannot be convenienced without injustice or undue delay to creditors. By the non-compliance or misinterpretation by the former bankrupt.
The Section 73 Proposal contains terms and guidelines that are legally enforceable by a trustee if the borrower defaults on its obligations.
When Does the Section 73 Proposal End?
A person may be declared bankrupt once that person does not perform in his or her role under the agreement. When all parties have completed their roles and responsibilities, the Section 73 Proposal will conclude.
Benefits to an individual and the creditors with a Section 73 proposal include:
- The terms of any offer by an individual to creditors can be flexible under proposed provisions of bankruptcy law.
- A bankruptcy proceeding is a legal process that provides for the receipt of funds and distribution to creditors in an orderly manner, while offering the opportunity to rebuild and move forward.
- Many creditors receive a greater return and do so more quickly than the bankruptcy continuing.
- Bankruptcy fees and outlays may be lower than the continuing costs of debt.