Rich Michaelson Magaliff Moser, LLP Rich Michaelson Magaliff Moser, LLP
Speak with one of our attorneys today.
TF 877.373.6811
|
NY 646.453.7851
Main Navigation
Real World Solutions To Real World Challenges
Best Lawyers | Best Law Firms | U.S.News & World Report | 2016 Best Lawyers | Best Law Firms | U.S.News & World Report | 2017

R3M has been voted a Best Law Firm by US News & World Report and Best Lawyers

Get Answers

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Three tips to help businesses emerge from bankruptcy

Businesses that struggle during tough economic times may need to go through a Chapter 11 bankruptcy. This form of bankruptcy is designed to help reorganize the business with the intention that it will come out of bankruptcy with the ability to operate again as a fully functioning business.

Businesses that are considering this process or that are finishing the reorganization plan are wise to take steps to help better ensure success when emerging from bankruptcy. For some, this includes the use of fresh start reporting.

Tip #1: Understand the basics of fresh start reporting

It is important to first have a basic understanding of what fresh start reporting is. The American Bankruptcy Institute defines fresh start reporting as:

[T]he term applied to the rules that allow companies to present their assets, liabilities and equity as a "new entity" on the day the company emerges from chapter 11 bankruptcy protection.

In order for a business to emerge with a fresh start after bankruptcy, two criteria must be met. These factors are:

  • Assets. The value of the assets of the emerging business must be less than the post-petition liabilities.
  • Voting shares. Also, holders of the existing voting shares must receive less than 50 percent of voting shares of the emerging business.

Once the business meets these criteria, the following tips can help to better ensure a more successful transition.

Tip #2: Get an accurate reorganization value

The reorganization value should be based on the estimated fair value. A recent piece in Accounting Today noted that this value should essentially be the equivalent of what a buyer would pay for the business.

Tip #3: Include the right things in your fair value estimation

This value estimation includes both tangible and intangible assets. Examples of tangible assets include real property like the building, office furniture and equipment used by the business. Intangible assets include trademarks and customer relationships.

No Comments

Leave a comment
Comment Information