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Difference Between Restructuring and Reorganization

Restructuring VS Reorganization

Restructuring can mean any of the following things:

A process of reorganizing a company’s ownership, legal, or operation structure for the betterment of the company or to increase its profits in the market.

It can also imply a change in the ownership, demerger, or change in the business like a buyout or a bankruptcy.

Three other terms can imply its meaning: financial restructuring, debt restructuring, and corporate restructuring.

The whole process of restructuring is based on a crucial decision of whether to reposition the company or save it by either selling a part of the company to investors or reducing services, or taking care of financial debts. To carry out this responsibility, either the company hires financial and legal advisors or a new CEO to make the decision.

Reorganization is taking control of a bankrupt or financially unstable firm by restating its assets and liabilities. It involves discussions with creditors about repayment so that the recurrence of the financial debts is minimized. Reorganization can also refer to the sale or merger of a company that involves a change in ownership, legal and management level changes, as well as a change in stocks. It is a court-supervised formal process that restructures a company’s finances after it faces bankruptcy. During the period when a company files for bankruptcy and the court reviews it, the company is saved from the creditors. Reorganization can also occur to take advantage of any changed tax regulations. This brings about legal as well as corporate structural changes to the firm involved. One of the aims of reorganization is to repay creditors as much of the debt amount as possible, and also restructure the company‚Äôs management, operations, and finances keeping in mind that the same problem (of bankruptcy) does not reoccur.

Differences between restructuring and reorganization:

1. Restructuring is done to make an organization profitable or to make it reach the

current market standards. Reorganization is needed to stabilize a company that is

facing bankruptcy.

2. A legal and financial advisor or a new CEO is hired to take care of a company during

restructuring. During reorganization, the entire process takes place under the

supervision of the court to take care of legal and management structural changes.

Summary:

1. Restructuring ensures that a company becomes more effective and better organized.

It focuses on the core business and takes care of changed strategic and financial

plans.

2. Reorganization makes sure that new opportunities are opened up, there is a rise in

profits, and updated legal and financial protections are given to companies during

trying times.


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1 Comment

  1. I googled the difference between restructuring and reorganization to either explain or compare what it is that can assist the comprehension of Nigeria’s current quest for political system that can make adequate meaning with what we have on hand and found out that one can combo the two lexicon to extract some comprehension for the ongoing narratives on restructuring of Nigeria. But finally and shortly I think the Nigerian state should be taken back to the old regional structure with the existing states functioning under the regions or zones as the case may be.

    Would the kakistocratic nature of our citizenry allow this change?

    Matter for another day.

    Thank you.

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