Multiple Creditor Facilitation

Multiple creditor facilitation and Section 155 Compromise

Multiple Creditor Facilitation is where a business entity has fallen into arrears with more than
two creditors and is unable to meet the financial obligations due in the foreseeable future.

The business entity should still be financially viable and the situation may have occurred due
to a once-off event or due to economic circumstances.

 

Multiple Creditor Facilitation will typically require a full financial restructuring depending
on severity of the business entity’s position.

A full-disclosure proposal will be sent to creditors including financial statements, a
liquidation report to show what dividend the creditor could reasonably expect in case of
liquidation as well as a auditing report with a 3 year projection to prove that there exists a
reasonable chance for the business to trade out of it’s current situation.

If necessary we will also conduct a meeting with the creditors with the aim of filing for a
Section 155 Compromise as contemplated in The Companies Act No.71 of 2008
More

 

Example:

Example: XYZ Painters have been experiencing a dramatic decline in sales figures due to
economic factors. They have made partial payments to some of their creditors but did not
have enough funds available to pay all their creditors.

They did make informal arrangements with KLA Bank to pay a lower monthly installment.

Their remaining creditors have now instigated legal action and have suspended XYZ

Painters’ line of credit making it impossible for them to purchase stock.

As the economy slowly recovers there is a reasonable expectation that XYZ Painters will
trade out of their current difficulties as they have a loyal customer base and a good track
record.

We will provide all creditors with a full-disclosure proposal including financial statements,
a liquidation report to show what dividend the creditor could reasonably expect in case of
liquidation as well as a auditing report with a 3 year projection to prove that there exists a
reasonable chance for the business to trade out of it’s current situation.

We will also motivate the proposals by providing a detailed business financial analysis.

The proposal would typically make provision for reasonable repayment terms whilst
providing XYZ Painters with the cash-flow needed to conduct business as usual.

If necessary we will also conduct a meeting with the creditors with the aim of filing for a
Section 155 Compromise as contemplated in The Companies Act No.71 of 2008.

Should a successful compromise agreement be reached a High Court may then formalize the
proposed repayment plan.