Ending the Venture

SHATTERED DREAMS
 Chapters of Bankruptcy

Chapter 7 (which involves liquidation of

assets)
A bankruptcy proceeding in which a company stops
all operations and goes completely out of business. A
trustee is appointed to liquidate (sell) the company's
assets, and the money is used to pay off debt.
 Chapter 11 (company or individual
"reorganizations")

• Chapter 11 is a form of bankruptcy that involves a

reorganization of a debtor's business affairs and assets. It
is generally filed by corporations which require time to
restructure their debts.
• Chapter 11 gives the debtor a fresh start, subject to the
debtor's fulfillment of its obligations under its plan of
reorganization.
• Chapter 11 reorganization is the most complex of all
bankruptcy cases and generally the most expensive. It
should be considered only after careful analysis and
exploration of all other alternatives.
 Chapter 13
(debt repayment with lowered debt
covenants or payment plans).
 Chapter 13 bankruptcy differs from the outright foreclosure
of an individual's or business's assets (seen in Chapter 7
bankruptcy) and the expensive and complicated
restructuring of debts seen in Chapter 11 bankruptcy.
 As part of the reorganization, the debtor must submit and
follow through with a plan to repay outstanding creditors
within three to five years. In most circumstances, the
repayment plan must provide a substantial payback to
creditors - at least equal to what they would receive under
other forms of bankruptcy - and it must, if needed, use
100% of the debtor's income for repayment.
 Process of filing Bankruptcy

Put your financial records in order

Get a lawyer

File for bankruptcy individually or jointly

File a petition under the Provincial Insolvency Act

through your lawyer.
 REORGANIZATION

Plan for Reorganization

Plan will divide the Debt and Ownership interest
into two groups.
 Those who will be affected by the plan
 Those who will not
 Combinations of Reorganization Plan

Extension: Largest Creditors agree to postpone any

claims
Substitution: Exchange stock or something else for
the existing debt
Composition Settlement: The debt is prorated to the
creditors as a settlement for any debt
 Strategy During Reorganization

Take the initiative in preparing the plan

Selling the plan to secured creditors
Communicating with group of creditors
Don’t write checks that cannot be covered
Seek support from the creditors
Don’t try to meet the group of creditors
 VENTURE TURNAROUND –
REINCARNATION OF DREAMS

NEVER NEVER NEVER BACK DOWN

 Venture Turnaround

The process of moving from a period of losses or low

profitability into a more profitable stage. A
turnaround may be triggered by a number of factors,
including a better use of assets or the development of
new products and services.
 Venture Turnaround Management

Bring in Turnaround consultants

Identify the root causes of the crisis
 Frequently encountered Causes

• Revenue downturn caused by a weak economy

• Overly optimistic sales projections
• Poor strategic choices
• Poor execution of a good strategy
• High operating costs
• High fixed costs that decrease flexibility
• Insufficient resources
• Unsuccessful R & D projects
 Frequently encountered Causes

Highly successful competitor

Excessive debt burden
Inadequate financial controls
 Stages of Turnaround Management

Management change
Situation analysis
 Change of top management
 Divestment of certain assets
 Reformulation of strategy
 Revenue increases
 Cost reduction
 Strategic acquisitions
 Stages of Turnaround Management

Emergency action plan

 Positive cash flow
 Eliminating departments
 Reducing staff
Business restructuring
 Adjusting the product mix
 Repositioning brand
Return to normalcy
 Harvesting Strategy

What is harvesting?
A) It is the sale of some or all of the equity of a
company.
A number of possible “exit routes”:
 M&A - A trade sale to another company
 The sale of the investment to another corporate
investor such as a venture capitalist.
 The sale of equity to another individual – such as a
fellow shareholder – or through management busy-
out or buy-in.
 ESOPS.
 The sale of equity to “the public” through an IPO
(initial public offering) on a stock exchange.
THANK YOU