As businesses continue to struggle financially through the loss of income due to the COVID-19 pandemic, many are turning to corporate restructuring in an effort to remain solvent.  Corporate restructuring is a common process that businesses undergo when they undergo experiences such as changes in ownership or a sudden loss of income.  Because stay-at-home orders have drastically reduced the income of almost every business in the country, more companies than ever are seeking legal counsel to help them restructure their business.

Corporate restructuring can be an incredibly complicated process, but with the help of effective legal representation, companies can come up with a solid plan and avoid common mistakes that plague many businesses.  We’ll go over everything you need to know about corporate restructuring and bankruptcy and how the right business lawyers can help get you back on track.

What Is Corporate Restructuring?

There are two types of corporate restructuring that businesses undergo.  Organizational restructuring involves changing the way the company is structured, and is usually done to cut costs and pay off any debt the business has accrued.  Organizational restructuring usually requires actions such as downsizing employees, redoing the hierarchy of the business, and reworking certain job positions in order to increase efficiency and reduce expenses.

Financial restructuring, on the other hand, usually involves a company working with creditors to restructure its debt in order to prevent the company from having to file for bankruptcy.  Financial restructuring has become incredibly common for many businesses dealing with substantial losses in profit during the COVID-19 pandemic.  In order to recover from financial crisis and remain in business, companies are turning to business lawyers to help them successfully navigate the restructuring of their business.

When a business is struggling financially and needs to pay off debt, they usually begin with financial and debt restructuring before also engaging in organizational restructuring.  After they consolidate and rework their debts through processes such as debt rescheduling or taking out new loans, they can then restructure their business model to increase profits.  The corporate restructuring process is a lengthy and complicated affair that almost always requires legal expertise to help navigate.

The Role Of Lawyers In Corporate Restructuring And Bankruptcy

Companies will bring in business lawyers to aid in corporate restructuring in an effort to avoid having to file for bankruptcy.  These business lawyers will negotiate agreements with creditors and help come up with repayment schedules that allow businesses to pay off their debts without becoming insolvent.  While business lawyers can help a company successfully restructure its debt out of court, they can also aid companies who are forced to file for Chapter 11 and go through the process of court-supervised restructuring.

Here are a few aspects of financial restructurings that business lawyers commonly cover:

  • Negotiating with creditors
  • Mergers and acquisitions
  • Buying or selling assets and debt
  • Real estate restructurings
  • Residential and commercial property closings
  • Bankruptcy litigation

Corporate Restructuring Strategies

Most corporate restructuring strategies involve a few key tactics to help secure funds and reduce expenses.  Companies will often sell off part of their business or liquidate assets in order to secure funds to pay their expenses.  Mergers and acquisitions are also common moves that allow a struggling company to be absorbed by another company that helps pay its debt.  These strategies often involve complex elements and can be difficult to successfully achieve, which is why the expertise of business lawyers is required to avoid costly mistakes that can tank a business.

Businesses may have to close down certain locations in order to sell them and generate funds to pay off debts.  These real estate transactions can be aided by qualified lawyers who will serve as an intermediary between the buyer and seller.  Lawyers will handle aspects such as drafting the sales contract and the letter of intent that can make or break a successful sale.

Out-Of-Court Restructuring

Companies will always prefer to restructure outside of court whenever possible in an effort to avoid the financial damage of bankruptcy.  The first step in out-of-court restructuring involves determining whether or not a company is able to successfully restructure without filing for bankruptcy.  Depending on the problems that lead to restructuring in the first place, a business may find that it can successfully solve its financial problems by negotiating its debts and making a few changes to the organizational structure.

If a business has enough funds to stay in business (or assets that it can liquidate) during the restructuring process, then it may be able to avoid bankruptcy.  Businesses will have to work with outside advisers to come up with a financial model for the restructuring process.  Business lawyers can help the company negotiate with creditors by either persuading them to hold off on collecting the debt or coming up with a sufficient payment plan that’s feasible for the company.

Court-Supervised Restructuring

If negotiation with creditors isn’t possible, or if a business is too far in the red to successfully sustain itself during the restructuring process, the business will have to initiate a Chapter 11 case.  This will allow them to take advantage of the protective provisions of the Bankruptcy Code during their restructuring process.  Legal representation is absolutely essential during the bankruptcy process to help a business determine their legal options or handle negotiations.

Choosing The Right Lawyer For Corporate Restructuring And Bankruptcy

When choosing a lawyer to help your business through the corporate restructuring process, it’s vital to hire an advocate with extensive business experience.  Here at Lubliner Law, we represent countless companies doing business both foreign and domestic.  Not only do we have extensive experience advising companies through corporate restructuring and bankruptcy, but we also are experienced in other aspects such as mergers, acquisitions, and business closings that can all aid the restructuring process.

We are experienced and dedicated advocates who will work tirelessly to guide your business through corporate restructuring and bankruptcy.  Call Lubliner Law at (561) 207-2018 for a free consultation, or email us at today!