Types Of Reorganizations
Types Of Corporate Reorganizations
Sometimes when an organization is having efficiency problems or wants to increase revenue, it chooses to reorganize its operations. Corporate reorganization is when a company changes departmental or internal structures to achieve a goal or objective. These kinds of changes are often made largely for efficiency and profitability and that means that legal and financial experts are needed to guide these changes.
In most cases, companies go through reorganization during a merger or acquisition or when they want to change their tax structure, or when the company is facing bankruptcy. Get in touch with an experienced business law attorney to learn more about the types of reorganizations.
Types Of Corporate Reorganization
Corporate Reorganization Types
The different types of reorganization include:
- Mergers and consolidations (Type A): This involves two or more companies merging to form a completely new and stronger company.
- Acquisition (Type B): This involves a corporation acquiring the stock of another corporation, but the acquired company becomes a subsidiary or acquiring company and is not liquidated. Since no liquidation happens, the Type B acquisition takes a short time, usually a year.
- Acquisition (Type C): The acquired company is liquidated but its shareholders have a stake in the acquiring company. However, the IRS may waive the requirement to liquidate in special situations.
- Recapitalization (Type E): When shareholders exchange stocks and securities for other stocks and securities, it is called recapitalization. Unlike acquisitions and mergers, this involves one company and is all about reconfiguring the company’s capital structure.
- Transfers (Type D): It is corporate restructuring that can involve both spinoffs and corporate split-offs.
- Transfers (Type G): Involves the transfer of some or all assets of and from a company that is filing for bankruptcy to a new company.
- Identity change (Type F): a corporation can decide to change its name, form, identity, or place of organization.
Alternatives For Corporate Reorganization
Corporate Reorganization Examples
When a business is going through financial distress, the first thing that crosses people’s minds is to reorganize the business to avoid bankruptcy. But sometimes the business owner does not want to lose control of the business or sell it to another entity under reorganization. In this case, the business can either file a Chapter 11 or a Chapter 7 bankruptcy.
A Chapter 11 allows the business to continue operating but the business must come up with an acceptable plan to pay off its debts. They must also change how they operate the business. For example, your business may have to downsize to reduce expenses and engage in negotiations with creditors.
On the other hand, filing for a Chapter 7 bankruptcy means the business is going to shut down. A business trustee will sell all the assets of the business and distribute the proceeds among creditors. Once the business is no longer operational, there will be no collection efforts from creditors.
Why You Need An Attorney
What Is A Corporate Reorganization
Corporate reorganization is a complex process that involves a number of legal procedures. So, you need a lawyer that understands your goals and objectives and is more aligned with your interests. An experienced lawyer can address your needs in almost any setting. Your main goal is for the reorganization to take place as successfully as possible and for you to achieve your goals.
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