Section 155 of the Companies Act (71 of 2008) sets out the procedure to be followed and the requirements to be met for a compromise to be proposed to creditors of a company.

A proposal for a compromise must contain all information reasonably necessary for a creditor to decide whether to accept the compromise arrangement. This proposal must be divided into three parts namely; the background to the compromise, the proposal and the assumptions and conditions to the compromise.

Creditors who receive an offer of compromise must seek legal advice on the terms of the compromise before deciding whether to vote in its favour or rather apply to court to commence business rescue proceedings or, if the facts are evident that the company is unable to pay its debts, apply to court to wind-up the debtor company.