Managing financial difficulties can be an uphill battle for companies.
Cash flow problems, accumulated debts and the imminent threat of bankruptcy can quickly become insurmountable.
However, there is a promising alternative that offers companies a glimmer of hope: the composition proposal. 💡
This financial restructuring mechanism offers a constructive and innovative approach to helping companies in difficulty to recover.
In this article, we take a closer look at the composition proposal, the key stages in the process and its benefits for companies in financial difficulty.
Get ready to discover how this alternative can offer a new perspective to struggling businesses, enabling them to bounce back and prosper once more. 👇
What is the concordat proposal?
The composition proposal is an agreement negotiated between the trustee and the creditors of a company in financial difficulty.
Its main objective is to enable the company to continue its activities by extending the repayment period and adjusting the amounts according to its ability to meet its obligations.
This agreement aims to offer an alternative solution to commercial bankruptcy, providing the company with an opportunity to reorganize and recover over the long term.
☝️ Let's take a concrete example: a company XYZ is experiencing major financial difficulties and is no longer able to repay its creditors according to the original terms and conditions.
In this case, the trustee in bankruptcy may propose a composition agreement to the company's creditors.
This proposal would involve extending the repayment period and reducing the amount to be repaid, depending on the company's financial capabilities.
Thanks to this proposal, XYZ would be in a position to continue its activities, repay its debts more realistically and give itself a chance of financial recovery.
Creditors, for their part, could recover part of their claims rather than risk a total loss in the event of bankruptcy.
In short, the composition proposal offers a constructive and balanced solution for companies in financial difficulty, promoting their recovery while safeguarding the interests of creditors. 🙌
What are the advantages of a proposal?
The proposal offers several significant advantages.
✔️ First of all, it is not subject to rigid terms and conditions, which means that the amount and repayment period can be adapted to suit the individual's financial situation, provided that these adjustments are reasonable and accepted by the creditors.
✔️ What's more, you won't have to negotiate directly with creditors.
In fact, it's the syndic who takes charge of the whole process, offering you relief and simplified management of your debts.
✔️ Regardless of the amount of your debt, you are eligible for a proposal, which broadens access to this solution for individuals and businesses.
✔️ As soon as the proposal is filed, payments to creditors, garnishments and lawsuits are suspended, giving you a financial break and the time you need to extend the deadline for repaying your debts.
In short, the composition proposal offers flexibility, protection and a recovery opportunity to overcome financial difficulties, for both individuals and businesses.
How do you know if a proposal is the best choice for your situation?
Determining whether a proposal is the best choice for your situation depends on a number of factors.
We recommend that you consult a trustee in bankruptcy, who will assess your financial situation and discuss the various options available to you.
Specifically, our trustee will analyze your debt load, income, expenses and other relevant factors to assess the viability of the proposal.
We will also examine your obligations to creditors and the possibilities for restructuring your debts.
Based on this information, N. Séguin Syndic will be able to advise you on the solution best suited to your situation, whether a proposal or other alternatives such as commercial bankruptcy or other restructuring mechanisms. ⚖️
What are the stages in the composition proposal?
In this section, we explore the various stages of the concordat proposal, from initial preparation through to concrete implementation of the agreement.
Discover the detailed process that enables companies in financial difficulty to negotiate and reach a balanced agreement with their creditors. 👇
1️⃣ Consultation with a property manager
As already mentioned, the first step in the proposal process is to consult a trustee in bankruptcy.
During this consultation, you will meet with the trustee to discuss your financial situation and assess the feasibility of the composition proposal.
The trustee will examine your debts, income, expenses and other relevant factors to determine if this solution is right for you.
This initial step is crucial, as it will enable you to understand your options and obtain professional advice for the rest of the proposal process.
2️⃣ Filing the notice of intent
The second stage in the composition proposal is the filing of the notice of intent.
Once you have decided to opt for a proposal, you must file a notice of intention with your local court.
This notice informs your creditors of your intention to negotiate a composition agreement.
3️⃣ Filing the composition proposal
The third stage of the proposal process is the filing of the proposal itself.
Once you have filed the notice of intent and the prescribed time period has elapsed, you are then in a position to formally file the proposal with your local court.
This proposal will detail the terms of repayment and restructuring of your debts, as well as the precise arrangements agreed with your creditors.
Once the proposal has been filed, the process of negotiating with creditors begins, under the supervision of the trustee, to reach an agreement accepted by all parties.
4️⃣ Suspension of garnishments, legal proceedings and payments to creditors
The fourth stage of the composition proposal is marked by the suspension of garnishments, legal proceedings and payments to creditors.
Once the composition proposal has been filed, these measures are suspended, offering financial respite to the company in difficulty.
Creditors are required to respect this suspension during the negotiation process and until an agreement is reached.
This allows the company to concentrate on restructuring its debts, and to continue operating without the interference of creditors during this critical period.
5️⃣ Presenting the proposal to creditors
The fifth stage in the composition process is the presentation of the proposal to the creditors.
Once the proposal has been filed and garnishments, legal proceedings and payments to creditors have been suspended, the trustee organizes a meeting with the creditors to present the details of the proposal.
Creditors then have the opportunity to examine the terms of the agreement, ask questions and give their opinion on the proposal.
This stage is crucial to reaching a consensus and obtaining creditor approval for the composition proposal.
6️⃣ Creditors' meeting
The sixth stage in the composition proposal is the creditors' meeting.
This meeting brings together creditors to vote on the approval or rejection of the proposal.
The trustee presents the details of the proposal, the proposed adjustments and answers creditors' questions.
7️⃣ Approval of the composition proposal
The seventh step in the composition process is approval of the proposal by the creditors.
If the majority of creditors vote in favor of the proposal at the creditors' meeting, it is approved.
Approval confirms that the creditors accept the terms of the proposal and undertake to respect the agreed adjustments.
This marks a key step towards finalizing the composition proposal and implementing the agreed repayment and restructuring arrangements.
8️⃣ Repayment of the amounts agreed in the proposal
The eighth stage of the proposal is the repayment of the amounts agreed in the proposal.
Once the proposal has been approved, the company in financial difficulty undertakes to respect the terms of the agreement.
This involves repaying creditors according to the terms and schedules specified in the proposal.
During this period, the company makes the agreed payments to gradually settle its debts and meet its obligations to creditors, while benefiting from the adjustments negotiated under the composition agreement.
Séguin Syndic is there to guide you through the proposal process and help you overcome your financial difficulties.
Contact us today to benefit from FREE EVALUATION and personalized, to find the best solution for your business and start the road to financial recovery. 📱
