Companies with total debt under $1M put a proposal to pay a certain amount of debt back to creditors who can vote to accept or reject the proposal. For the proposal to be accepted a majority in value of creditors must vote to accept the proposal. Note the plan can also not go for more then 3 years.
The proposal generally contains the following:-
The assets sold or source of funds to pay for the proposal
The amount the creditors will be repaid i.e. 70 cents in the dollar.
Each proposal is different, however, the reforms are modeled on Part 9 Debt Agreements in the Bankruptcy Act which generally aim for a 50-70c in the dollar return to creditors. If you are looking for a more cost effective option consider a Liquidation or Voluntary Administration.
The company and its director stay in control of company operations unlike a Voluntary Administration or Liquidator where the insolvency practitioner takes over.
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