A Division 1 Proposal is a debt settlement offer for a company or business. The process provides creditor protection, provides a restructuring alternative to bankruptcy, and allows for the compromise of most debts. A Commercial Proposal can restore a company or business to financial viability, preserve jobs, and often gives creditors a better return than a bankruptcy.

In order for a Division 1 or Commercial Proposal to succeed it will generally be necessary for the directors to show that:

• The problem which caused the difficulties has been corrected

• The company can in future be profitable

• The creditors will receive a greater return than they would if the company was to be liquidated

• The creditors will generally receive a reasonable percentage of their money back from the proposal

There are several other factors which will affect the likelihood of the success of a corporate proposal, such as:

• The percentage of their debt the creditors would recover

• The existence of secured creditors

• The existence of Trust debts such as payroll deductions or GST/HST debt owed to the government

• Actions already taken by the creditors

It will be necessary for the directors to prepare a "statement of cash flow" for at least a 12 month period to show that there is a realistic possibility for the company to pay its ongoing commitments as well as being able to contribute funds towards the proposal.

The process involves a Meeting of Creditors and the approval of a percentage of the creditors, as well as the Court.

A Division 1 Proposal requires careful drafting as, if it is refused, you are automatically bankrupt. We have a very high success rate with the proposals we have drafted.

This is a Federal Government regulated debt settlement program which is binding on all creditors, provided the required majority are in favour of the offer. Proposals can only be administered by a Licensed Insolvency Trustee and are the only government administered debt relief programs.