Definition
Banking: A private or court-mediated agreement between a debtor and unsecured creditors, under which the creditors agree to settle for a certain fraction of monies owed by the debtor.
When it is a voluntary agreement, it is properly called a scheme of arrangement and is governed by the ordinary law of contract. Otherwise (if the debtor is insolvent) it is a deed of arrangement which is governed by the relevant statute. The primary objective of an arrangement is avoidance of bankruptcy. See also letter of leniency.
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One useful but fairly uncommon type of contract stipulation is a most-favored-customer clause. Under such an arrangement, no one gets a better price than this customer, or if someone else does then th ... Read more
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