Working out a solution: Pros and cons of an out-of-court workout
A BUSINESS facing financial distress has several options – liquidate, commence insolvency proceedings, or undergo a form of judicial reorganisation to either exit the market or attempt to revive its fortune. These are formal processes that involve the courts in some way or another.
Those who prefer a private agreement between parties can opt for a process known as an out-of-court workout. This is essentially a private process in which a debtor and its creditors reach – or as the name suggests, work out – an agreement that reduces the debtor’s debt burden and allows it to continue operating.
The courts may still be involved in some kinds of workouts (that is, hybrid workouts), but this article will focus on agreements reached without any judicial interventions.
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