Introduction

The Republic of Rwanda gazetted the new Law n° 075/2021 of 06/12/2021 relating to insolvency and introduced the concept of a compromise plan in its section 4.

A compromise plan may be proposed by the following persons: 1° a debtor; 2° insolvency practitioner; 3° a company’s or partnership’s creditor.

The plan must contain all information relating to the basis and its effects which must be considered by the creditors during examination and for its confirmation.

What is indicated in a compromise plan?

It must indicate the following:

1° a list of all the assets of the company or partnership as well as an indication of the assets held as security by creditors before the compromise plan;

2° current financial statement made by certified public accountant;

3° list and classes of creditors;

4° claims of each class and related rights;

5° mode of payment of each class of claims and related rights;

6° the probable payment each class of creditors would get if the company were to be placed in liquidation.

Implementation of a compromise plan

The compromise plan must provide adequate means for its implementation, such as:

1° retentions by the debtor of all or any part of the property;

2° transfer of a part or the whole of their property;

3° satisfaction or modification of the right to preference;

4° invalidation or modification of contract;

5° curing or waiving of any default;

6° the procedures through which workers and directors are appointed and the mode of subsequent replacement on the interests of the creditors.

The plan may also provide the appropriate means to implement it, including ensuring that accepted claims and claims that occurred during the period of compromise are settled.

The compromise plan may also indicate all other information necessary during insolvency proceedings.

Notice of proposed compromise

A public notice and individual notice is given to each known creditor, company or partnership, administrator or liquidator by the proposer  in not less than ten (10) working days before the meeting is held indicating the intention to hold a meeting of creditors or any class of creditors for the purpose of voting on the draft resolution.

The proposer gives to each known creditor, the company or partnership, administrator or liquidator and to the Registrar General a written notice of the result of the voting.

When the notice for convening a meeting is issued, all proceedings against the property of the debtor or the continuation of legal proceedings to recover claims are stayed unless a court decides otherwise. This does not affect the right of a secured creditor to take possession of and realize any property in the insolvent estate over which that creditor has a charge.

What should be in the public and individual notices of proposed compromise?

The proposer compiles a list of known creditors and creditors in each class of creditors of the company or partnership who would be affected by the proposed compromise, setting out the amount owing to each and the number of votes which each is entitled to cast on a resolution approving the compromise.

Approval of compromise

A compromise is approved by creditors or any class of creditors if voted by at least seventy-five percent (75%) of votes of all creditors having taken part in the vote.

Where a resolution proposing a compromise is put to a vote of more than one class of creditors, it is presumed that the approval of the compromise by that class is conditional on the approval of the compromise by every other class voting on the resolution unless the contrary is expressly stated in the resolution.

Effect of compromise

A compromise approved by creditors or any class of creditors of a company or partnership is binding on the company or partnership and on all creditors or class of creditors to whom notice of the proposal is given.

Cancellation of the binding force of compromise

Within twenty (20) working days of the date of notice that a compromise was approved, a creditor who was entitled to take part in the vote may apply to the court for an order that he or she is not bound by the compromise on the following grounds:

1° insufficient notice of the meeting or of the matters required to be notified was given to that creditor;

2° there was some other material irregularity in obtaining approval of the compromise;

3° the compromise is unfairly prejudicial to that creditor or to the class of creditors to which that creditor belongs in the case of a creditor who voted against the compromise.

Conclusion

It is important to engage an Insolvency practitioner for proper advice and procedures on how to navigate through this process.