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    Chapter 17 - Ending The Venture

    Uploaded by

    Arman
    This document discusses various aspects of ending a business venture, including bankruptcy and succession planning. It provides an overview of different types of bankruptcy proceedings under Chapters 7, 11, and 13 of the Bankruptcy Code. These include liquidation under Chapter 7, reorganization under Chapter 11, and installment payments under Chapter 13. It also outlines strategies for surviving reorganization, warning signs of bankruptcy, and considerations for succession planning or harvesting a business through direct sale, employee stock options, or management buyout.

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    Chapter 17 - Ending The Venture

    Uploaded by

    Arman
    2K views18 pages
    This document discusses various aspects of ending a business venture, including bankruptcy and succession planning. It provides an overview of different types of bankruptcy proceedings under Chapters 7, 11, and 13 of the Bankruptcy Code. These include liquidation under Chapter 7, reorganization under Chapter 11, and installment payments under Chapter 13. It also outlines strategies for surviving reorganization, warning signs of bankruptcy, and considerations for succession planning or harvesting a business through direct sale, employee stock options, or management buyout.

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    This document discusses various aspects of ending a business venture, including bankruptcy and succession planning. It provides an overview of different types of bankruptcy proceedings under Chapters 7, 11, and 13 of the Bankruptcy Code. These include liquidation under Chapter 7, reorganization under Chapter 11, and installment payments under Chapter 13. It also outlines strategies for surviving reorganization, warning signs of bankruptcy, and considerations for succession planning or harvesting a business through direct sale, employee stock options, or management buyout.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    2K views18 pages

    Chapter 17 - Ending The Venture

    Uploaded by

    Arman
    This document discusses various aspects of ending a business venture, including bankruptcy and succession planning. It provides an overview of different types of bankruptcy proceedings under Chapters 7, 11, and 13 of the Bankruptcy Code. These include liquidation under Chapter 7, reorganization under Chapter 11, and installment payments under Chapter 13. It also outlines strategies for surviving reorganization, warning signs of bankruptcy, and considerations for succession planning or harvesting a business through direct sale, employee stock options, or management buyout.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 18

    17-1

    Chapter

    17

    Ending The Venture

    17-2

    Bankruptcy
    Bankruptcy Act (1978 & 1984)
    Fair Distribution To Creditors Protect Debtors- Unfair Depletion & Demands Debtors-

    Chapter 7 Liquidation (70%) Chapter 13 Installment Payments (29%) Chapter 11 Reorganization (1%) Prepackaged Bankruptcy
    17-3

    Bankruptcys Lessons
    A. Overextension To Markets B. Protects From Creditors Not Competitors C. Entrepreneur = Business D. Recognize Failure Too Late E. Emotionally Painful
    17-4

    Chapter 11- Reorganization 11Least Severe Alternative- Breathing AlternativeRoom Cash Flow Problems Can Be Overcome Plan Prepared & Approved By Court
    ExtensionExtension- Postpone Claims SubstitutionSubstitution- Exchange Something For Debt CompositionComposition- Prorated Settlement
    17-5

    Bankruptcy Survival
    Bargaining Chip- Restructure And ChipReorganize File Before Failure Of Cash Or Revenue Chapter 11- Only If Chance Of Recovery 11Examination Of Transactions For Fraud Maintain Good Records Understand Completely Transfer Litigation To Bankruptcy Court Realistic Reorganization Plan

    17-6

    Chapter 1313Extended Payment


    Budgets Future Income To Outstanding Debt Payment Of All Priority Claims

    17-7

    Chapter 13- Priorities 13Secured Creditors Administrative Expense Claims From Operations Wage Claims Contributions To Benefit Plans Claims Of Consumer Creditors Taxes General Creditors
    17-8

    Chapter 7- Liquidation 7Voluntary vs. Involuntary Involuntary Requirements


    Debts Not Being Paid When Due (1 3 Creditors) Custodian Appointed Fair Value Of Assets < Debts (Balance Sheet Test)
    17-9

    Bankruptcy Trustee
    Elected By Creditors- Interim CreditorsAppointed By Court Becomes Owner Of All Nonexempt Property Can Set Aside Petitions Transfers Property To Creditor
    17-10

    Strategy During Reorganization


    Prepare Plan Sell Plan Communicate No Checks That Cant Be Covered

    17-11

    Reducing Risk Of Failure


    Avoid Excess Optimism Prepare Good Marketing Plan Make Good Cash Projections Keep Abreast Of Market Identify Business Stress Points
    17-12

    Bankruptcy Warning Signs


    Financial Management Lax Inability To Document/Explain Transactions Large Discounts To Speed Up Cash Flow Contracts Below Standard Amounts Bank Wants Subordination Key Personnel Leave Lack Of Materials Unpaid Taxes Demand For Cash Payment Customer Complaints Increase
    17-13

    Failure Reality
    Consult with Family/Friends Seek Outside Assistance Drop Venture That Is Draining Resources
    17-14

    Succession Planning Issues


    Senior Management Committed To Plan WellWell-Defined Job Descriptions Open Process
    17-15

    Succession Planning
    Transfer To Family Member
    Role Of Owner- Full-Time/Part-Time/Retire Owner- Full-Time/PartMembers Able To Work Together? Income Transition Business Environment Loyal Employees Tax Consequences

    Transfer To Non-Family NonTrain Key Employee- Retain Some Equity EmployeeRetain Control- Hire Manager ControlSell
    17-16

    Harvesting
    Direct Sale Employee Stock Option
    2-3 Year Plan to Sell To Employees Create Trust Fund

    Management Buy-Out- Based On Buy-OutValue Of Goodwill & Asset Appraisal


    17-17

    Direct Sale
    Requires Time & Planning Buyer Payment Method Business Broker Business Plan Employment Contract Covenant Not To Compete
    17-18

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