Reorganization- Entreprenuership 2003

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    SHATTERED DREAMS

    Ending the Venture

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    C hapters of Bankruptcy

    y Chapter 7 (w hich involves liquidation of assets)

    y A bankruptcy proceeding in which a company stops

    all operations and goes completely out of business. A trustee is appointed to liquidate (sell) the company'sassets, and the money is used to pay off debt.

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    C hapter 11 (company or individual"reorganizations")

    C hapter 11 is a form of bankruptcy that involves areorganization of a debtor's business affairs and assets. Itis generally filed by corporations which require time torestructure their debts.C hapter 11 gives the debtor a fresh start, subject to thedebtor's fulfillment of its obligations under its plan of reorganization.C hapter 11 reorganization is the most complex of all

    bankruptcy cases and generally the most expensive. Itshould be considered only after careful analysis andexploration of all other alternatives.

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    Chapter 13(debt repayment with lowered debt

    covenants or payment plans).y C hapter 13 bankruptcy differs from the outright foreclosure

    of an individual's or business's assets (seen in C hapter 7 bankruptcy) and the expensive and complicatedrestructuring of debts seen in C hapter 11 bankruptcy.

    y A s part of the reorganization, the debtor must submit andfollow through with a plan to repay outstanding creditors within three to five years. In most circumstances, therepayment plan must provide a substantial payback to

    creditors - at least equal to what they would receive underother forms of bankruptcy - and it must, if needed, use100% of the debtor's income for repayment.

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    P rocess of filing Bankruptcy

    y P ut your financial records in order

    Get a lawyer

    File for bankruptcy individually or jointly

    File a petition under the Provincial Insolvency Actthrough your lawyer.

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    R EORGAN IZ AT ION

    y P lan for R eorganizationy P lan will divide the Debt and Ownership interest into

    two groups.T hose who will be affected by the planT hose who will not

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    C ombinations of R eorganization P lan

    y Extension: Largest C reditors agree to postpone any claims

    y Substitution: Exchange stock or something else for

    the existing debty C omposition Settlement: T he debt is prorated to the

    creditors as a settlement for any debt

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    Strategy During R eorganization

    y T ake the initiative in preparing the plany Selling the plan to secured creditorsy C ommunicating with group of creditorsy Dont write checks that cannot be coveredy Seek support from the creditorsy Dont try to meet the group of creditors

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    VENTUR E TURNAR OUN D R EI NCARNAT ION OF D R E AM S

    y N EVER N EVER N EVER B ACK DOW N

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    Venture T urnaround

    y T he process of moving from a period of losses or low profitability into a more profitable stage. A turnaround may be triggered by a number of factors,

    including a better use of assets or the development of new products and services.

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    Venture T urnaround M anagement

    y Bring in T urnaround consultantsy Identify the root causes of the crisis

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    Frequently encountered C auses

    R evenue downturn caused by a weak economy Overly optimistic sales projectionsP oor strategic choicesP oor execution of a good strategy High operating costsHigh fixed costs that decrease flexibility

    Insufficient resourcesU nsuccessful R & D projects

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    Frequently encountered C auses

    y Highly successful competitory Excessive debt burdeny Inadequate financial controls

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    Stages of T urnaround M anagement

    y M anagement changey Situation analysis

    C hange of top management

    Divestment of certain assetsR eformulation of strategy R evenue increasesC ost reduction

    Strategic acquisitions

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    Stages of T urnaround M anagement

    y Emergency action planP ositive cash flow Eliminating departments

    R educing staff y Business restructuring

    A djusting the product mixR epositioning brand

    y R eturn to normalcy

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    Harvesting Strategy

    What is harvesting?

    A) It is the sale of some or all of the equity of acompany.

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    A number of possible exit routes :

    M&A - A trade sale to another company

    The sale of the investment to another corporateinvestor such as a venture capitalist.

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    The sale of equity to another individual such as afellow shareholder or through management busy-out or buy-in.

    ESOPS.

    The sale of equity to the public through an IPO(initial public offering) on a stock exchange.

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    T H ANK YOU