COMPOSITIONS AND SCHEMES OF ARRANGEMENT

The debtor may lodge a written proposal with the Official Receiver for a composition or other arrangement of his affairs within four days of submitting his statement of affairs, or such further time as the Official Receiver may allow. The procedure thereon is as follows:

(a) The Official Receiver must summon a meeting of creditors before the conclusion of the public examination, sending a copy of the proposal to each of them with his report thereon;

(b) The proposal must be approved by a majority in number and three fourths in value of all creditors who have proved;

(c) If the proposal is accepted by the creditors, it must be approved by the court, three days' notice of hearing being given to each creditor; the hearing cannot take place until after the conclusion of the examination;

(d) The court cannot approve the proposal until it is heard the Official Receiver's report on the debtor's conduct and any objections of the creditors: the court should approve the proposal if satisfied that the statutory requirement have been complied with, and it is in the interests of creditors generally and not contrary to public policy.

(e) The court must refuse to approve it if:

• The terms are unreasonable or not for the benefit of the creditors generally, or
• Any of the facts that would disentitle a bankrupt to an immediate unconditional discharge from bankruptcy are proved unless provision is made of at least Shs 25 per Shs 100 on all provable unsecured debts, or
• Provision is not made for the prior payment of preferential debts;

(f) If approved by the court, the scheme is binding in respect of all provable debts, except those from which the debtor would not be released on discharge.

(g) The scheme may be annulled if:

• The debtor defaults in payment, or
• It cannot proceed without injustice or undue delay to the creditors or the debtor, or
• The court's consent was obtained by fraud.

In practice, such proposals are rare; of a debtor wishes to put forward a scheme, he will normally do so before bankruptcy proceedings are begun.