Dec 8, 2017
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What is Corporate Debt Restructuring?

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What is ‘Corporate Debt Restructuring’

Corporate debt restructuring is the reorganizing the debt structure of the company. It facilitates also reducing the burden of the debts on the the company by decreasing the rates paid and increasing also the duration of the debt. This in turn increases the potentiality of the company of repay its obligation. Also, some of the debt may waive of their debt in exchange of equity position in the company.

The objective of the Corporate Debt Restructuring framework is to ensure a timely and transparent mechanism for restructuring of the corporate debts of viable corporate entities affected by internal or external factors

The Reserve Bank Of India, Notification BP.BC. 15 /21.04.114/2000-01, retrieved on 8th December 2017 , Original Notification by RBI

A corporate debt restructuring comes into light when a company is facing financial problems or difficulties in repaying its obligation. If the problems are enough to turn a company bankrupt then it can negotiate with the creditors of the company to reduce the burden of debt.

 Corporate Debt Restructuring will apply only to multiple banking accounts/syndicates/consortium accounts with outstanding exposure of Rs.20 crore and above with the banks and financial institutions.

The Reserve Bank Of India, Notification BP.BC. 15 /21.04.114/2000-01, retrieved on 8th December 2017 , Original Notification by RBI

Corporate Debt Restructuring

Debt restructuring

Debt Restructuring is a process by a private or public company, or a sovereign entity who has financial difficulty. It is unable to repay its obligations. Therefore, the corporate reduce and renegotiate its debts. So as to increase its potential or restore liquidity so that it can continue its operations. Companies with debt obligation uses this method. It is to change the terms of the debt agreements in order to save itself from becoming bankrupt. Individuals on the verge of insolvency and also countries heading for default uses debt restructuring.

Reorganization

Corporate uses this process to survive from financial problem and also bankruptcy. It involves the restatement of assets and liabilities. As well as negotiating with creditor to make arrangements for maintaining repayment. Reorganization is an try to survive from bankruptcy by special arrangements and restructuring in order to minimize the possibility of again facing the financial problems and also bankruptcy. It is change in the structure and also ownership of a company through a merger or consolidation, acquisition, transfer, recapitalistion or change in identity.

 

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The Companies Act, 2013

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