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What is fund corporate restructuring?
Large or small, businesses no matter the size will go through a corporate restructuring at some point. Corporate restructuring is usually an action taken place to significantly adjust capital structure or its operations. Often it is financial reasons as to when corporate restructuring occurs like significantly modifying debt and operations as well as changing the structure of a company if there is a merger or consolidation, a corporate buyout/acquisition, a corporate takeover, a recapitalization, or a divestiture (spin-offs and split-offs).
Why do I need legal guidance corporate restructuring?
In order to conduct a successful corporate restructuring, there are several players involved including financial, operational, legal and other business entities. The most important role a lawyer plays in corporate restructuring is to negotiate and strategize restructuring plans so that there is a smooth transition to a more profitable business in the long term. During these negotiations and strategy developments there are a number of factors to consider like reducing, eliminating, or changing product or services; canceling contracts; writing off assets; mitigating risk and error; creating the appropriate divestiture approach; planning for tax optimization; and many other legal issues.
Corporate Restructuring and Bankruptcy
When a company becomes financially distressed, meaning a company cannot generate sufficient revenues or income to pay their debts, and are unable to restructure on their own, the company will file for bankruptcy. Filing for bankruptcy allows a business a fresh start with debt forgiveness but also gives creditors the opportunity to obtain some repayment from the liquidation of assets from the business. All bankruptcy filings must be made through the U.S. federal courts.
There are a number of different types of filings one can make as they enter into bankruptcy but the bankruptcy filing that effects the structure of businesses is Chapter 11. Chapter 11 Bankruptcy is designed to allow the business filing for bankruptcy to stay open, restructure the business, and become profitable once again. Often Chapter 11 is referred to as a “reorganization” bankruptcy. Under Chapter 11 a company can propose a reorganization plan to the court to restructure debts that is in the best interest of the creditors. Many name brand retailers have filed for Chapter 11 including J.C. Penney, Sears, Toys R Us, Neiman Marcus, and Circuit City.
Filing for Chapter 11 can be a very expensive and lengthy process. When filing for Chapter 11, companies are forced into a corporate restructuring. And some businesses, in order to avoid filing for a Chapter 11, might choose to take a restructuring route by using any number of corporate restructuring strategies to simplify the process and save the company money
Glossary of Important Terms
Here are some important terms to learn when it comes to corporate restructuring:
Contact a Business Law Attorney Who Specializes in Corporate Restructuring
Any business in the position to go through a corporate restructuring will need the right financial and legal teams on their side to make sure that from start to finish the process has a thoughtful strategy in place and airtight deals and contracts signed. If you need assistance with your corporate restructuring strategy, contact us contact us at 833-ASK-BLAKE or fill in the form below.