Difference Between Restructuring in the UK and the USA

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What is the Difference Between Restructuring in
the UK and the USA from an Advisory
Perspective? 0 Comments / Business Rescue / By
Viv1 Transatlantic lending is becoming a much
more viable option for a lot of businesses at the
moment. With that, it is worth considering how
restructuring compares between the UK and US
markets. There are many differences when it comes
to managing finances in these two countries if
you plan on working in both markets, you should
be sure you are staying up to date with
them. This means both commercially and in law
because once you thoroughly understand these
aspects, you will be in a much better position if
you want to restructure your business. This
article will discuss company restructuring in the
UK and US. Restructuring in the UK In the UK, if
a business finds itself under economic pressure
and wants to know how it can effectively deal
with said pressure whilst continuing to operate,
it will usually put together a restructuring
plan. This is an alternative to entering
liquidation, which can often be costly and very
final. This is a formal agreement between the
organisation and its creditors, which can act as
a plan to pay off liabilities and make the
company solvent again. These plans can come
about in a number of ways, including Compromisin
g on the amount of debt which is owed Making a
debt for equity swap The resetting of
covenants Making reschedules for debt
payments What Are the Benefits of a
Restructuring Plan in the UK? When a business in
the UK has a number of outstanding debts and
liabilities, a restructuring plan can be a very
effective way for an organisation to be able to
balance its debts and get back on top of
everything. They provide a much more sustainable
platform for businesses that have existing debts.
When Will a Restructuring Plan Be Used?
There are a number of different occasions where a
business will choose to use a restructuring plan
in the UK. These include When the directors of
a business want to restructure a balance sheet
where the business is still valuable except for
the debts and liabilities. There is a debt or a
group of contracts where the terms are onerous.
Essentially, the rationale used is that the
company would be solvent if not for this group of
contracts. This usually applies to a group but
can also apply to just one contract in
particular, it depends on the organisation and
the way that they operate. They are often
implemented when a shareholder or director of a
company wants to keep control over that company
during a period of economic hardship. They will
look for funding for their business but will only
look for it on the basis that they can continue
to have a say over what the business will do
moving forward. A restructure can also be done if
there is a specific division of the company that
is underperforming. As such, businesses can
restructure so that they wind down that specific
section in order to minimise the impact on the
remaining organisations. Restructuring In the
USA If a business in the USA is facing
liquidation, then it may be the case that
instead, they file for Chapter 11 bankruptcy.
This is a form of bankruptcy that makes it so
that a debtor has space and legal protection to
restructure the way that their business works in
order to pay back creditors over a certain period
of time. It is often seen as a lifeline for
businesses, and therefore, a lot of organisations
in the US opt for it. If this is going to be
successful, then the debtor has to make
strategic, fundamental changes to the business.
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Restructuring After Bankruptcy in the US Once an
organisation in the US has filed for chapter 11
bankruptcy, it will be offered a number of
different incentives that should help them with
its restructuring. It can be beneficial because
these incentives might give a debtor power to do
something that they were not able to do back
during the regular running of their organisation.
For instance, they might be given sufficient
power to amend or pause any debts that they have
ongoing. Approval of a Restructuring Plan Like
in the UK, US companies will have to draw up a
restructuring plan which will then need to be
approved. There are a number of different
guidelines that they need to meet, which may not
apply within the UK. These include A debtor has
to file their restricting plan within 120 days of
filing for bankruptcy. The court can extend this
period if necessary. The plan needs to lay out
how the business is going to be able to meet its
financial responsibilities moving forward. The
court will need to have a trustee appointed that
will keep watch over the proceedings to ensure
that the plan keeps on track. The debtor needs to
file lots of documentation such as balance
sheets, regular earnings and profitability
records these will all help the court when it
comes to looking through the restricting plan and
deciding whether or not to sign off on it. Is
Your Business Considering a Restructure? If your
business operates in both the US and the UK and
is considering a restructure, then you must be
aware of the main differences between the
countries. The whole purpose behind them remains
similar, but the name of the process and the
steps contained within it vary. As such, you
should speak to experts, such as Simple
Liquidation, who can provide further information.
They will be able to consider your business and
its current liabilities and provide information
on how you can effectively move forward. If you
have any questions or require further
information, do not hesitate to get in touch.
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