A. The Restructuring Candidate
The restructuring of the financial affairs of an insolvent company usually involves a compromise or rearrangement of the claims of secured and/or unsecured creditors of the company. The typical insolvent restructuring candidate is usually either undercapitalized or inadequately funded to meet its near term operating commitments. This may happen for a number of reasons including, over spending, poor or declining revenues, broad economic slowdown, industry slowdown or consolidation, a mismatching of receivables and payables, management mismanagement, etc. Regardless of the reason though, in the context of an insolvency it is up to management, with the assistance of its advisors, to weigh the pros and cons of a restructuring, a liquidation or bankruptcy, or maintaining the status quo and hoping for the best, as the most fitting option given the circumstances. A restructuring, it goes without saying, is an attractive option because, if successful, it allows a financially troubled company to hopefully regain its economic stability by preserving and reinforcing its value as a going concern. If successful, it often results in a better company as a whole going forward.
B. The Restructuring Options
The restructuring of an insolvent company may follow a formal or informal process. An informal process is non-judicial, non-statutory in nature. A formal process is either court-supervised or statutorily driven, or both. In Canada, a formal restructuring process may take the form of:
a) a proposal under the Bankruptcy and Insolvency Act ("BIA");1
b) a plan of arrangement or compromise under the Companies' Creditors Arrangement Act2 ("CCAA");
c) an arrangement under the Winding-up and Restructuring Act; or
d) a plan of arrangement under certain corporate legislation.
To read the rest of this article please see http://www.casselsbrock.com/pdf/seminars/RestructuringandAssociatedDocuments_Jan08_Spizzirri.pdf