Preventive Composition

Definition: Preventive Composition is a debtor-led, court-supervised procedure and subsequent contract between a debtor and its creditors, which becomes binding on them upon approval by the competent court. If the court accepts the debtor's application, the debtor will be placed under the supervision of a court-appointed expert – or trustee – and all bankruptcy proceedings, other claims and enforcement actions relating to the debtor are automatically stayed. It aims to save the company that is defaulting in paying its debts from bankruptcy and to allow the company to continue its activities and achieve its interests, in addition to restoring the rights of creditors.

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More on corporate law: Bankruptcy, Corporate Haven, Out of Court Workout.

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