Restructuring – what is it and how to do it efficiently?

The term restructuring is increasingly used in the press and the internet. Many of us, when we hear about the restructuring of a company, wonder what the term actually means. Other people are wondering how to carry it out efficiently.

Restructuring

For some, restructuring means all measures that can be taken to improve the economic situation of an entrepreneur. For others, proceedings conducted on the basis of the Restructuring Law. It may seem that the definitions indicated are different. Contrary to appearances, restructuring is a combination of them.

The legislator, when introducing the provisions of the Restructuring Law, aimed at protecting entrepreneurs from bankruptcy by allowing them to enter into an arrangement with their creditors. In addition, in the case of cure proceedings, the cure actions, that is, legal and factual actions aimed at improving the economic situation of an entrepreneur. Therefore, the main task of the restructuring procedure is to improve the economic situation of the entrepreneur under this procedure.

This is also confirmed by the regulations contained in the Restructuring Law, which allow, within the framework of composition proposals, for the redemption of liabilities and their termination. As well as regulations suspending the obligation to pay for the duration of the proceedings, making it impossible to terminate the agreements due to arrears or to conduct enforcement proceedings for the debt covered by the arrangement by law. These regulations make it significantly easier for entrepreneurs to take action to improve their situation and have a positive impact on their current liquidity.

Therefore, it can be considered that restructuring is a procedure conducted on the basis of the Restructuring Law Act, within the framework of which actions are taken to improve the economic situation of an entrepreneur.

Efficiency of restructuring proceedings

Many factors influence the course and efficiency of the restructuring process. Some of them are not dependent on entrepreneurs. A debtor undergoing restructuring has no influence on the speed of actions taken by the Court. However, it does have an impact on other circumstances, which translate directly into the course of restructuring and its efficiency.

The effectiveness of restructuring proceedings is affected by the time of the entrepreneur’s reaction to changes in the economic environment, which directly or indirectly affect his financial liquidity. A sufficiently rapid reaction of the entrepreneur may prevent the loss of financial liquidity, as a result of which he will be obliged to file a bankruptcy petition. It may also affect the success of restructuring proceedings. The sooner we react and introduce solutions, the sooner we stabilise the company’s situation and complete the restructuring process.

PREPARING THE ENTREPRENEUR AND HIS ENVIRONMENT FOR RESTRUCTURING

Another important factor of efficient restructuring is the preparation of the entrepreneur. In the course of restructuring proceedings, many activities should be undertaken which are to directly improve the economic situation of the entrepreneur. An entrepreneur who wants to carry out restructuring efficiently should identify problematic areas of his business activity even before submitting an application to open restructuring proceedings. Then he should establish an action plan and scope of activities that will positively affect his financial liquidity. Early identification of problems and consideration of possible actions will significantly affect the effectiveness of restructuring proceedings.

An important aspect is also maintaining relations with contractors. Undertaking by the entrepreneur talks with key contractors may contribute to maintaining mutual cooperation during the restructuring proceedings. It may also contribute to working out common solutions that will allow for out-of-court restructuring. Moreover, it significantly affects the possibility of further business activity and obtaining money to satisfy current costs and creditors.

The efficiency of restructuring proceedings depends to a large extent on the entrepreneur himself. The speed with which the entrepreneur takes a decision on restructuring, the determination and planning of the scope of activities to be carried out, as well as the maintenance of relations with contractors will have a significant impact on the effectiveness of restructuring proceedings.