Out of Court Restructuring Options and Advantages
Many companies face financial difficulties nowadays, and one of the ways to tackle them is by opting for out of court restructuring. Find out what restructuring means and what advantages it can bring.
What Is Out-Of-Court Debt Restructuring?Out-of-court restructuring is a bankruptcy alternative that allows you to carry out negotiations with creditors in order to find solutions that will put your company back on the right track. The discussions are held in an informal environment, outside the court, hence the name 'out of court restructuring.' The purpose is to reach an agreement regarding the company's debts.
Informal restructuring is usually the best-case scenario for companies who face financial distress and try to avoid bankruptcy. The actors involved in these procedures are the company's key creditors. Out of court restructuring is also known as 'workout.' If the procedure works out, the company may continue its activity without being supervised by the court. In order to start a workout procedure, the company needs all its creditors' consent.
What Are the Current Options?An out-of-court restructuring can be carried out differently; this is not a standard procedure, and you can choose the best option for your business:
- Renegotiate your debt terms in order to pay them off at a later time
- Enter a standstill agreement to prevent creditors' enforcement action
- Get a loan to cover your debts
- Sell some of your assets
- Bring changes to your company's management or business processes (internal restructuring)
- Get refinancing from new leaders
- Transfer your company's assets to a new company
What Are the Advantages of Opting for Out-Of-Court Restructuring?Out-of-court restructuring is the least severe method that can save a company from financial collapse. Here are some of the advantages it can bring:
-You can resort to this bankruptcy alternative at any time, voluntarily
-It doesn't imply external parties
-You avoid the burdening formalities of insolvency
-You save time by not going to court
-A workout provides a degree of flexibility you would not have in bankruptcy
-Your right to file for bankruptcy is not affected
Out of court restructuring procedures can be a unique and convenient alternative to bankruptcy. However, in order to have a successful outcome, you need an experienced legal specialist by your side. A commercial lawyer can help you choose the best workout option for your business and negotiate with your creditors.