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Simple English definitions for legal terms
C reorganization
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A quick definition of C reorganization:
C Reorganization is a type of financial restructuring that happens when one company exchanges its voting shares for almost all the assets of another company. This type of reorganization is done to improve the tax treatment of the company under the Internal Revenue Code. It is one of the many types of reorganizations classified by the Code with different letters.
A more thorough explanation:
A C reorganization is a type of financial restructuring of a corporation that involves the exchange of voting shares for substantially all the assets of another corporation. This type of reorganization is classified under the Internal Revenue Code as a way to improve a corporation's tax treatment.
- A company A exchanges its voting shares for substantially all the assets of company B. This is a C reorganization.
- A company C reduces the principal amount of indebtedness owed to creditors through a restructuring. This is a haircut reorganization.
The first example illustrates a C reorganization where one corporation exchanges its voting shares for substantially all the assets of another corporation. The second example is a type of restructuring that reduces the principal amount of indebtedness owed to creditors, which is a common usage of the term "haircut reorganization".