Creditor Composition Agreement

Summary

This Creditor Composition Agreement is used when a company is doing an out of court workout and needs agreement of most of its unsecured creditors, usually trade creditors, to restructure their debts, due to financial difficulties. This template includes practical guidance and drafting notes. A composition is an agreement in which the creditors take partial payment and often lengthened terms to satisfy outstanding debts. In order for the company to complete a composition, the participating creditors must agree. Each individual creditor is asked to participate in a composition agreement and has the option to refuse participation. This template contains a claim repayment clause in which the participating creditor expressly agrees that payment under this composition agreement constitutes payment in full and the participating creditor has no claim other than the right to be paid under this agreement. The blanks and bracketed material should be filled in as appropriate. For a cover letter to accompany the sending of this proposed Creditor Composition Agreement to creditors, see Creditor Composition Request Letter (Unsecured Creditor). For more information on compositions, see Compositions and Extensions. For a full listing of key content that provides an overview of several out-of-court restructuring options, including workouts, and liquidation alternatives to filing for bankruptcy protection, see Out-of-Court Restructuring and Liquidation Alternatives Resource Kit.