A debtor applies to the court for composition and then presents a draft of a composition deed which is then adopted at the creditors' meeting and sanctioned by the court.
(11) If, however, the court deems upon examination that an application for composition complies with the provisions of the 2006 EBL, it must rule on composition, announce it and hold a creditors' meeting to discuss the draft of a composition deed. (12) In the 2006 EBL there is no provision concerning investigation of whether an applicant for composition is eligible.
The 2006 EBL states that the adoption of a composition deed at the creditors' meeting shall be based on the consent of half or more of the creditors with the right to vote who attend the meeting, representing two thirds or more of the total credit amount free from property guaranty.
The composition deed, if adopted at the creditor' meeting and confirmed by the court, is effective.
As to the liabilities that have been exempted according to a composition deed, the relevant debtor may, from the day when the composition deed is concluded, not be responsible for the liabilities of compensation.
Composition procedure can only start with the consent of the debtors and, whether a composition deed will be concluded still mainly depends on debtors.
However, once there are too many creditors, winning their approval for a composition deed is no easy task.
(63) In particular, the debtor's draft proposal of a composition deed constitutes an offer.
Only the creditors' committee has the power to decide whether to give consent to the composition deed. The extension of the debtors' solvency does no more than preserve an entity from which creditors could get their investment back.
According to Chapter XI of the EBL a successful composition must go through at least five stages: starting bankruptcy procedure, application for composition, composition deed proposal, creditors' committee's approval and the court's confirmation.
A composition deed enjoys no compulsory enforcement.
Third, the extremely harsh requirements for approval of the composition deed meant that composition could be easily denied.