Mar 24, 2022

Rehabilitation and restructuring of the administrative, financial and operational processes of establishments

Rehabilitation and restructuring of the administrative, financial and operational processes of establishments

Businesses need effective and quick procedures to exit as often as they need to start operating, all over the world, and restructuring procedures help entrepreneurs to close their non-viable business and start new ones, this ensures that the human and economic resources of a country are continuously redirected to be used efficiently and thus increase productivity aggregate economy.

However, as the scale of the business grows, there is also a risk that poor management, bad business judgment or obvious fraud may result in the business becoming unviable, and in such cases, it is possible to restore enterprise productivity at low cost and without the attendant shock to the owners. interest by providing the most capable managerial talent an opportunity to operate them.

Rehabilitation and restructuring of the administrative, financial and operational processes of establishments

Indeed, recent times have demonstrated the potential for growth by entrepreneurs, who have become dominant business entities internationally by transforming ailing firms and revitalizing dormant capabilities. Globally, restructuring reform is recognized as an important way to improve the competitiveness of any Economie.

Objectives of rehabilitating and restructuring the administrative, financial and operational processes of establishments

The general economic objective of rehabilitation measures is to enable the financially distressed enterprise to become a competitive and productive participant in the economy, thus benefiting not only the enterprise's stakeholders (owners, creditors, employees) but also the economy in general. Creates incentives for all stakeholders to participate in the actions, or - when necessary - prevent some stakeholders from undermining them.

Thus, for example, the features of the proceedings must be attractive enough to encourage debtors to start proceedings early enough in the face of their financial difficulties, thus increasing the chance of rehabilitation, and on the other hand, the restructuring measures must provide adequate protection for creditors to earn Their confidence that it will not only be used as a tool by an institution that is unable to delay liquidation, during which time the value of their claims will deteriorate.

 To ensure that the rehabilitation achieved under the procedure will provide long-term competitiveness rather than just a temporary reprieve, the insolvency law (and other related laws) must avoid placing undue restrictions on the type of restructuring that can occur, thus, for example , the rehabilitation plan must be able to provide for debt-to-equity conversions, as well as for debt restructuring or debt forgiveness.

A closely related objective of rehabilitation procedures is to provide a means by which the value of creditors' claims can be enhanced or maintained, at least in the case of secured creditors, and to achieve this objective it is important that the law provides the creditors with an adequate opportunity to vote on the plan or, in the case of secured creditors , provides for measures that will ensure that their claims or property rights are not prejudiced and, moreover, that creditors should be given the opportunity to initiate a rehabilitation scheme, either directly or through an official.

For some countries, an additional and somewhat specific objective of the rehabilitation procedure is to provide a “second chance” to entrepreneurs, and by doing so, an effective rehabilitation procedure encourages the development of the class of entrepreneurs, and to achieve this aim the rehabilitation procedure should give The debtor has the opportunity to prepare and propose a rehabilitation plan, either directly or through the administrator.