Restructuring is a legal process that aims to save a company that is in serious financial difficulties. The purpose of restructuring is to avoid bankruptcy and find a solution that can ensure the survival of the company while protecting the interests of creditors as best as possible.

What is reconstruction?

Restructuring is regulated in the Bankruptcy Act and is a formal process that involves a number of measures, which may include:

• Preparation of a reconstruction plan.
• Negotiations with creditors about payment arrangements.
• Implementation of the company's restructuring.

Restructuring may be relevant for companies that still have the potential to run a healthy business, but have encountered temporary financial difficulties.

When is reconstruction relevant?

Reconstruction may be an option if:

1. The company is insolvent or approaching insolvency.
2. There is still a realistic possibility of saving the company.
3. Both the company and the creditors can achieve a better solution than in bankruptcy.

It is important to react quickly if the company experiences serious financial problems, as delays often reduce the chances of successful reconstruction.

How does the reconstruction process work?

The restructuring process begins with a petition for restructuring being filed with the bankruptcy court. The petition can be filed by either the company itself or by a creditor. Once the petition is approved, the court appoints a reconstructor and a trustee to help carry out the process.

1. Preparation of a reconstruction plan

The reconstructor prepares a plan that typically includes:

• An analysis of the company's financial situation.
• Suggestions on how to make the company viable.
• A plan for how creditors will be satisfied.

2. Negotiation with creditors

A central element of the restructuring is negotiations with creditors. This may involve:

• Debt reduction (debt forgiveness).
• Rescheduling of payment deadlines.
• Preparation of a composition scheme where creditors agree to receive a percentage of their receivables.

3. Restructuring the company

To make the business viable, it may be necessary to make a number of changes, including:

• Reduction of operating costs.
• Sale of non-core assets.
• Optimization of company processes.

What happens if the reconstruction fails?

If it is not possible to reach an agreement with the creditors, or if the restructuring plan cannot be implemented, the company will typically be declared bankrupt. This means that the company's assets will be sold and the proceeds will be distributed among the creditors.

Benefits of reconstruction

• Possibility of preserving jobs.
• Creditors can often obtain better coverage than in a bankruptcy.
• The company gets a chance to continue operations.

Challenges in reconstruction

• The process can be complex and time-consuming.
• Requires support from creditors.
• Often requires extensive legal and financial expertise.

How can we help?

As experienced lawyers, we have extensive expertise in advising companies through the restructuring process. We can help with:

• To assess whether reconstruction is the right solution.
• To prepare a sustainable reconstruction plan.
• To negotiate with creditors.
• To ensure that all legal requirements are met.

Contact us today for a confidential and non-binding conversation about how we can help your business through a difficult period.