Reorganization - Explained
What is a Reorganization?
Written by J. Mance Gordon
Updated at April 19th, 2024
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What is a Reorganization?
Reorganization is a process structured to restore a firm that is bankrupt or one that's financially unstable. A reorganization entails asset and liability restatement, and also holding talks with creditors so as to arrange repayment.
The United States bankruptcy law gives public companies the option of reorganization (as apposed to liquidation). Specifically, through Chapter 11 bankruptcy, firms are capable of continuing operations while renegotiating their debt with their creditors so as to try getting more favorable terms. The bankruptcy court supervises the reorganization.
Reorganization can also imply a change in a company's structure or ownership via a merger or consolidation, recapitalization, transfer, spinoff acquisition, or identity change, or management structure.
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