Word count 433

Introduction

Bankruptcy or receivership process

Bankruptcy can be defined when an entity is unable to honor its financial obligations or make
payment to its creditors. It files for bankruptcy. A petition is filed in the court for the same where
all the outstanding debts of the company are measured and paid out if not in full from the
company’s assets. (CFI, 2020)

According to World Bank (2016), Bankruptcy process occurs when an entity or creditor file a
legal course undertaken by the company to pay or free itself from debt obligations. Debts which
are not paid to creditors in full are forgiven for the owners. Bankruptcy process varies in
different countries.

Capital structure

Capital structure of an entity refers to the amount of debt and/or equity employed by a firm to
fund its operations and finance its assets. A company capital structure is typically expressed as a
debt-to-equity or debt-to-capital ratio. (CFI, 2020)

Debt and equity capital are used to fund a business’s operations, capital expenditures,
acquisitions, and other investments. There are tradeoffs firms have to make when they decide
whether to use debt or equity to finance operations, and managers will balance the two to find the
optimal capital structure. (CFI, 2020)

Legal structure

According to CFI (2020), Legal structure of an entity or bankruptcy law regulated the interaction
between debtors and creditors when debtors default and the parties cannot work out their
differences outside the courts. The law addresses two main types of conflict: conflicts between a
debtor and her creditors, and conflicts among creditors themselves. Empirically, this later type of
conflict is the major source of complexity in modern bankruptcy law, and has therefore given
rise to a substantial literature, much of which in law. (Erik Berglöf & Gérard Roland, 2009)
How these structures impact on Nation-link Company

The Somaliland telecommunication company went bankrupt in 2017, as we mentioned above the
bankruptcy process varies in different countries. A company may survive and come out of
bankruptcy or may lose and start liquidation process, and loss investments from creditors.
Unfortunately, According to World Bank, (2016), Somaliland bankruptcy or insolvency process
is low on getting credit, protecting investors, resolving insolvency, and starting a business. This
difficult process affect nation link and it could not stand after its bankruptcy.

Works Cited
CFI. (2020, 4 11). capital structure . Retrieved 11 15, 2012, from corporatefinanceinstitute.com:
https://corporatefinanceinstitute.com/resources/knowledge/finance/capital-structure-
overview/

Erik Berglöf & Gérard Roland. (2009). The Design of Corporate Debt Structure and Bankruptcy. University
of California at Berkeley and CEPR, 41.

WorldBank. (2016). Somaliland’s Private Sector at a Crossroads. Washington DC: The World Bank.