Compositions by nature can be an expensive process.
A composition is a procedure where a bankrupt can seek to enter into a compromise with his or her creditors,
which, if approved by the prescribed majority of the creditors, and the court, entitles the bankrupt
to have the bankruptcy annulled.
The process normally commences with a proposal by the bankrupt to the bankrupt’s creditors to take something
in satisfaction of the debts due to them. This something may be for example 10 cents on each dollar of debt.
Each class of creditor must pass a special resolution accepting the composition however if this step is passed
then a meeting of creditors is called to vote again on the composition. At this point the composition can be
altered from that original put forward before final voting occurs.
If creditors by way of a special resolution confirm the composition (confirming resolution) then the High
Court must approve the composition which will then become binding on all creditors of the bankrupt.
A deed is then drawn up in conformance with the approved composition.
It is worthy to note that when bankrupted all property of the bankrupt vests in the Official Assignee however when
the bankruptcy is annulled under a composition, not all property will not necessarily be revested back to the bankrupt,
the property must be dealt with in accordance with the deed.
The process is complex and not inexpensive however it has the benefit of annulling the bankruptcy and
removes the conditions and restrictions placed upon bankrupts.