Out-of-Court Restructuring and Liquidation Alternatives Toolkit
Resources to assist companies, creditors, and their counsel in identifying and understanding the various out-of-court alternatives for restructuring or liquidating a distressed business.
Financially distressed business debtors and their creditors have a variety of alternative restructuring or liquidation ( www.practicallaw.com/9-382-3590) options to filing a bankruptcy case. These alternatives can often accomplish many of the same things that are effected in a bankruptcy proceeding, though sometimes in a simpler and more efficient manner. Determining whether a particular alternative is best for the parties depends on various factors. Companies often restructure their outstanding indebtedness and adjust their capital structure to:
Extend outstanding debt maturities ( www.practicallaw.com/8-501-2838) .
Decrease interest expenses.
Increase liquidity ( www.practicallaw.com/7-382-3591) .
Access new or cheaper funding sources.
Management of a financially troubled business may also determine that dissolving or winding up ( www.practicallaw.com/7-382-3911) their business is in the best interest of its constituents. While a Chapter 7 ( www.practicallaw.com/9-385-0748) or a Chapter 11 ( www.practicallaw.com/1-500-6505) bankruptcy may be appropriate for achieving this goal and maximizing value, a non-bankruptcy alternative may be more appropriate and better suited depending on the circumstances.
Some out-of-court alternatives offer greater flexibility, others are less expensive, and still others provide more legal protection for a debtor's management or for buyers of the debtor's assets. Each alternative also has potentially different ramifications if the debtor later files for bankruptcy.
Out-of-court restructuring ( www.practicallaw.com/8-382-3915) and liquidation alternatives include:
Debt restructurings and exchange offers.
Corporate dissolutions ( www.practicallaw.com/9-382-3415) , informal liquidations, and wind ups.
Loan modifications and amendments.
Compositions and assignments for the benefit of creditors.
When assessing whether an out-of-court restructuring or liquidating alternative is appropriate, companies and their creditors must consider factors, such as:
Corporate governance and fiduciary duties ( www.practicallaw.com/7-382-3459) .
State withholding and employee taxes.
Employment laws, including WARN Act ( www.practicallaw.com/5-382-3912) .
This Toolkit contains continuously maintained practice notes, standard documents, checklists, country Q&A, and articles to help companies and their creditors identify and understand various out-of-court alternatives for restructuring or liquidating a distressed business.