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Simple English definitions for legal terms
A reorganization
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A quick definition of A reorganization:
Reorganization means changing the way a company is structured. This can happen for different reasons, like when a company owes a lot of money and needs to make a plan to pay it back. There are different types of reorganizations, like mergers or consolidations, where two companies become one. Reorganizations can also happen to make a company's taxes better.
A more thorough explanation:
Definition: A reorganization is a financial or tax restructuring of a corporation. It can involve a bankruptcy, merger, consolidation, recapitalization, or transfer of assets to another corporation.
Example 1: In a bankruptcy reorganization, a trustee creates a plan to repay the corporation's debts, which is approved by a court. This can involve reducing the principal amount of indebtedness owed to creditors, known as a "haircut" reorganization.
Example 2: In a tax reorganization, a corporation may merge or recapitalize in order to improve its tax treatment under the Internal Revenue Code. The Code classifies different types of reorganizations with different letters, such as A, B, C, D, E, F, and G reorganizations.
These examples illustrate how a reorganization can take different forms and serve different purposes, but ultimately involve restructuring a corporation's financial or tax situation.