Restructuring insolvent firms

Restructuring occurs when a business significantly modifies its debt, operations, ownership, or structure to either improve or protect itself.

Restructuring is often but not always, a response to financial pressure felt by a business. It can also be an effective way of improving business performance for example, selling a cost centre.

So why should you want to restructure rather than close a financially distressed business? An operating business is worth more than its parts, but not in a clearance sale.

Assets such as goodwill and custom software have significant value to a continuing business but lose almost all of their value in liquidation. This is why liquidation rarely sees all creditors paid in full.

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This briefing is a highlight of legislative and policy changes and is intended to be of general use only. It is not intended to create an advocate-client relationship between the sender and the receiver. It does not constitute legal advice or a legal opinion. You should not act or rely on any information contained in this legal update without first seeking the advice of an advocate.