Restructuring a company at risk of insolvency is often the last real chance to save the company from bankruptcy. A properly planned restructuring process – conducted in collaboration with an experienced restructuring advisor – allows you not only to avoid bankruptcy but also to rebuild financial liquidity and maintain business continuity.
In the article you will learn:
- how company restructuring works,
- when is it worth starting it
- what role does a restructuring advisor play in it?.
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Contents:
What is company restructuring?
Company restructuring is legal and business process, the purpose of which is to adapt the financial, organizational, or operational structure of the enterprise to the current market and financial situation. In the Polish legal system, restructuring is regulated by Restructuring law, whose primary goal is avoiding entrepreneur bankruptcy.
Restructuring may include, among others:
- debt restructuring,
- changes in the organizational structure,
- renegotiation of contracts with creditors,
- cost optimization,
- sale of redundant assets.
Restructuring a company at risk of insolvency
The threat of insolvency appears when a company loses the ability to settle liabilities on time or when financial forecasts indicate such a scenario in the near future.
The sooner the decision to restructure is made, the greater the chances of success of the process.
In practice, restructuring allows:
- stop bailiff enforcement,
- secure company assets,
- sort out relationships with creditors,
- create a real recovery plan.
Types of restructuring proceedings
Restructuring law provides for several procedures, which are selected depending on the scale of financial problems:
Most frequently used procedures:
- proceedings for approval of the arrangement,
- accelerated arrangement proceedings,
- composition proceedings,
- sanitation proceedings.
Each of these procedures is different:
- the degree of court interference,
- scope of protection against creditors,
- duration,
- level of control over the enterprise.
The purpose of the restructuring proceedings
The main goal of the restructuring is conclusion and approval of an arrangement with creditors, which enables:
- dividing the debt into installments,
- partial write-off of liabilities,
- change of payment deadlines,
- maintaining the company's financial liquidity.
In most cases, restructuring does not mean liquidation of the company, but his continued operation in a modified form.
Restructuring and bankruptcy – key differences
| Restructuring | Bankruptcy |
| The goal is to save the company | The goal is to eliminate or organize |
| Protection against execution | Lack of asset protection |
| Possibility of further activity | Termination of business |
| Arrangement with creditors | Satisfaction of creditors from the bankruptcy estate |
In some situations bankruptcy may be the solution, however, it should be treated as a last resort.
Who is a restructuring advisor?
The key tasks of a restructuring advisor include:
- analysis of the company's financial situation,
- developing a restructuring strategy,
- negotiations with creditors,
- stakeholder relationship management,
- optimization of the organizational structure,
- support in bankruptcy proceedings (if necessary),
- monitoring and modification of the restructuring plan.
Attention: The experience of the restructuring advisor has a direct impact on the effectiveness of the entire process.
Company restructuring step by step
Step 1 – Diagnosis of the financial situation
Analysis of the company's debt, liquidity and profitability.
Step 2 – Choosing a restructuring procedure
Selecting the best course of action for the scale of the problems.
Step 3 – Negotiations and arrangement with creditors
Development of realistic arrangement proposals.
Step 4 – Implementing the recovery plan
Operational and financial restructuring.
Example restructuring scenarios
- debt restructuring without selling assets,
- partial sale of assets unnecessary for the business,
- restructuring with a deep reorganization of the enterprise.
Frequently asked questions
Does restructuring protect against bailiffs?
Yes – once the proceedings are opened, the company gains protection against enforcement.
When does restructuring not make sense?
When a company is unable to continue operating even after restructuring.
Can every company restructure?
No – the ability to conclude and execute the agreement is necessary.
Summary
Restructuring a company at risk of insolvency is a complex but often effective way to save a company. The key element to success is cooperation with an experienced restructuring advisor, who will plan and carry out the entire process safely and efficiently.
Contact PMR Restrukturyzacje SA., to assess whether restructuring is the best solution for your company.
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