Rescuing companies in crisis requires quick action and special skills

Time is often of the essence when trying to rescue a company in crisis. That’s why it’s important to create a good and targeted collaboration between the company’s management, owners, creditors and external advisors.

In a compressed restructuring process, it is not unusual for some of the preconditions for the restructuring to change along the way. New claims may emerge, new potential buyers may come on board or creditors may lose faith in the project during the process. It is therefore essential that the restructuring team can work together, demonstrates great flexibility and possesses a high level of professionalism, each in their own field.

At Kielberg Advokater, we have extensive experience in participating in and leading such restructuring processes. We draw on our large professional network of business partners and deploy a team of legal specialists who possess precisely the expertise required in the reconstruction in question.

In addition to a high level of expertise in the individual legal areas, a successful reconstruction is often the result of a broad overview, extensive professional experience and good working relationships with external advisors, creditors and investors.

What is company reconstruction?

In business, companies can periodically face financial challenges that threaten their livelihood. In these situations, reorganization is a crucial strategy that can restore a company’s financial balance and prevent the threat of bankruptcy. This process opens up opportunities for continued operations and is available to both individuals and businesses, but in this article we will focus on corporate restructuring.

Reconstruction, formerly known as suspension of payments, is a tool under bankruptcy law that can be used to save a company from bankruptcy. The process involves one or more reconstructors, appointed by the bankruptcy court at the request of either a creditor or the company itself. The bankruptcy court may also appoint an accounting professional, such as an accountant, to assist in restoring the company’s finances.

Reconstruction can include:

• Settlement agreement: An agreement with the company’s creditors where the claims are either reduced in percentage, canceled completely or the payment date is postponed.
• Business transfer: The transfer of all or a viable part of the business to another company.
• Other measures that alone or together with the other parts of the reorganization result in the company ceasing to be insolvent.

During the reorganization process, the company’s day-to-day management continues to run the business. However, major decisions require the approval of the administrator, which differs significantly from bankruptcy proceedings where a trustee takes over management.

Who can request a company reorganization?

Any natural or legal person, including individuals, associations, companies and firms, can file a petition for business reorganization. The primary condition is that the person or entity in question cannot pay its debts to creditors. Reorganization can help restructure the debt and restore the economy.

It is important to understand that filing for reorganization does not automatically guarantee approval. The court will make a thorough assessment of the financial situation of the person or entity in question and other relevant factors before making a decision on reorganization.

Reconstruction procedure: A thorough process

The reorganization starts when both creditors and the company request the bankruptcy court to initiate reorganization proceedings. The bankruptcy court appoints administrators and sets a date for a planning meeting with the creditors. At this meeting, the administrator presents an overall plan for the company’s reorganization. The creditors then vote on the plan’s approval.

If the plan is approved, the administrator must prepare a reorganization proposal within six months, typically including a compulsory composition or a business transfer. The proposal must also be approved by the creditors. The reorganization can be terminated if the proposal is not approved. If a plan is approved, the deciding factor is: the company becomes solvent through the reorganization or goes bankrupt.

The importance of experience and collaboration

Time is often of the essence when trying to save companies in crisis. Effective collaboration between management, owners, creditors and external advisors is essential. Restructuring is a complex process where conditions can change. Flexibility and collaboration are key.

At Kielberg Advokater, we bring not only our legal expertise, but also our extensive network of business partners. We work closely together as a team of specialists who can handle every aspect of corporate restructuring. Our experience and ability to adapt to changing circumstances make us a reliable partner in restructuring cases.

Contact us today to discuss your situation and find a path to recovery.