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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Creditors' compromise (Part 14)

What is a creditors' compromise, and how does it bind creditors who vote against it?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A creditors' compromise is a proposal under Part 14 of New Zealand's Companies Act 1993 in which a company's debts are reduced, deferred or otherwise varied, and which binds every creditor in a class once a majority in number holding 75% in value of those voting in that class approves it. Unlike a scheme of arrangement, it needs no court sanction, though a creditor who objects can apply to the court not to be bound. The nearest UK equivalent is a company voluntary arrangement, and in Australia it is a deed of company arrangement, which is reached through voluntary administration.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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