Turnaround Management 2

Restructuring ability

Restructuring worthiness

The issue is mainly about uneven treating of creditors, to pay the loan back or interest in a time when the bankruptcy already is clear or assumed and so not all creditors will receive their full credits and interests back.

For the company:

- High level of free reserves

- Transfer of revaluation reserve to share capital

For the shareholder:

- Partial realization of substance with equal dividend rate

- AGM gives order to BOD

- BOD has 2 years to perform the capital increase

- Can't be bigger than 1/2 of existing shares

- Change of statutes necessary

- For convertible resp. option bonds

- Step by step capital increase parallel to conversion / option exercises

- Can't be bigger than 1/2 of existing shares

- Change of statutes necessary

- Opinion of independent accountants (yearly)

- Yearly announcement of current level of share capital

- Written form highly recommended

- Not cancelable

- No time restrictions

- No strict legal restrictions as under SCHKG

- The corporation needs to find an agreement with every single creditor (so not viable in case of many creditors)

- Advantage: No equal treating of creditors needed

- But: The coporation is not protected against claim enforcement actions of creditors

- Other issue: The suppliers change the payment term to pre-payment

- A judge is involved - a majority of the creditors and the judge need to agree

- Very costly

- The endorsement (Bestätigung) is published in the SHAB and no creditor can start enforcement actions

- A solicitor is managing and controlling the company