Compositions and Extensions

Summary

This practice note discusses compositions and extensions. A composition is an out-of-court contractual arrangement between a company and two or more creditors pursuant to which the creditors agree to receive a stated partial payment in full satisfaction of their debts, discharging the company. Compositions are also referred to as "common-law compositions of creditors." An extension is a contract between a company and two or more creditors in which the creditors agree to extend the time for payment of their outstanding debts in full. Thus, a contractual agreement between a company and its creditors may be a composition, an extension, or both.