CORPORAte debt restructuring
We offer you a wide range of services to help you capitalize the opportunities available in your niche market. We turn around our Corporate Debt Restructuring quickly and orderly to ensure these opportunities no longer pass you by. We identify targets and interested business patterns promptly so you can focus on what really matters.
If you’re wondering if you need Corporate Debt Restructuring, here are some potential corporate insolvency issues that you might be facing right now:
- As a director of a distressed business, you are worried that your company is trading in in-solvency.
- You are unable to manage your exposure to losses.
- You are unable to ensure directors or stakeholders are given clear insolvency advice on options available to them.
- You are unable to recover the value of financial stake holding lost through the business.
Debt Restructuring Q&A
Debt restructuring exercise is one of the options to restructure a company during turbulent times. Most companies are not intentionally trying to run away from their debt commitment however, they require more time to restructure their whole businesses including their Debt.
Those companies that are facing financial difficulty including those companies that their creditors have commenced and/or pending commencement of legal proceeding against them.
Yes, there are legal remedies to assist companies to conduct this exercise under the Companies Act 2016 (“CA 2016”).
There must be a viable proposed scheme of arrangement which would detail the proposal by the company to repay its debt and consideration of factors like protecting the employment of its employee, which would be important factors to be factored into any proposal.
Companies Act 2016 provides for the following remedies;
- Scheme of Arrangement (“SOA:)– Section 366
- Judicial Management (“JM”) – Sections 404 and 405
- Corporate Voluntary Arrangement (“CVA”) – Sections 396 and 397
- SOA is a court-supervised mechanism for debt restructuring exercise. This is to allow companies in financial distress to compromise with creditors and if they agree on the arrangement of payments, it can be achieved by way of formalizing it into a Scheme of Arrangement
- Secondly, JM is a new rescue mechanism where the company is placed under a court appointed insolvency practitioner, known as judicial manager. Once an application for JM is filed to the court, moratorium automatically starts until an application for JM is decided. During this period, legal actions which filed by creditors will be suspended pending disposal of the JM application. The duty of the judicial manager is to supervise and restructure the company instead of liquidation.
- Thirdly is CVA, it allows a distressed company to work out a debt arrangement with creditors. The court is not involved actively in CVA mechanism. The core purpose of this approach is to effectively solve the financial difficulties of the company to avoid liquidation. CVA is only suitable for private companies with no secured debt.
During the Debt Restructuring exercise, company can propose a scheme to the creditors, which sometimes provide for extended repayment clauses and also repayment of a lesser sum than the actual debt sum owed.
It depends on the scheme. The scheme is based on the company’s financial situation and the core proposal of the scheme. For example, companies which are in the construction industry may seek to extend the repayment period after the receipt of retention sum or companies that are currently proposing buy-out by a “white knight” can propose repayment after completion of the acquisition exercise.
Yes, as long as the company is not insolvent. The company intending to proceed with the scheme of arrangement or judicial management in the interim can apply for a Restraining Order (“RO”) or through the automatic moratorium for judicial Management proceeding to “suspend” the winding up proceeding.
Restraining Order in the context of Section 368 CA2016 is a type of prohibitory order against legal proceeding granted by the court which effectively “suspends” all legal proceedings against the company. Restraining Orders are granted to allow the company to conduct the debt restructuring exercise without the constant threat of legal proceeding.
Yes, if the terms of the Restraining Order provides for such terms granted by the court and the same concept is applicable for Judicial Management as in section 410 CA 2016.
Restraining Order is an order granted by court whereby Section 368 provides for the first restraining order of not more than 3 months and thereafter to be extended further subject to condition of not more than 9 months. Hence, in total no more than a period of One (1) year.