Judicial reorganisation takes preparation

Your creditors are pressing you. You do not have the cash to meet your debts. The banks are pulling out. And there is no prospect of the situation improving in the weeks ahead.

In that case there is a good chance you would do well to seek the court’s protection through judicial reorganisation. Particularly if you still believe your company can be saved with some changes. Or if you have no idea, and would like a stay in which to look into the question properly.

What the stay gives you

Judicial reorganisation puts your debt in brackets for a period of up to four months. That time is meant to let you find solutions to your failing position: renegotiating your debt with your creditors, reorganising the company to improve its profitability and viability, winning new contracts that would generate additional margin, or negotiating a price increase with your customers.

Why your accountant and your lawyer are not enough

Your accountant will confirm the analysis of your figures and prepare those to be submitted to the court as part of the proceedings. Your lawyer, if you have one, will help you on the legal side and represent you before the judge. But that will not be enough.

The judge will usually grant an initial stay readily enough. After that, you will either have to reach an agreement with your creditors yourself, or, if that proves impossible, demonstrate that you have a plan to relaunch the company and save it.

The plan is the crux of the matter

That plan, which is in fact a business plan, will be central to the whole procedure. It has several characteristics. First, you will have to develop it very quickly and get it accepted by the judge. Then, during the reorganisation period, you should ideally achieve the first concrete progress against it, so as to show the judge that the plan which convinced him on paper is producing results on the ground. It is that sort of evidence which will win his acceptance.

Three decisions to take BEFORE filing

• The list of creditors. Whatever plan you put forward, the more creditors accept it, the more inclined the judge will be to follow you. Hence the importance of listing your creditors and identifying those likely to be favourable — and of doing so before starting proceedings. In some cases there may be ways of influencing the list.
• The filing date. Any plan needs a minimum of cash. The moment you choose to apply will therefore be critical: should this or that debt be paid before or after the hearing?
• Protecting your personal assets. A point to settle beforehand, not once proceedings are under way.

All of which is to say that judicial reorganisation is prepared and planned. The earlier you do it, the more you improve your chances of saving your company and the jobs that go with it.

Nady Bilani