Reorganization Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Reorganization, written in plain English, along with examples of how it is used.

What is Reorganization?

(n) Reorganization is the restructuring of a corporation with an intention to continue the operations in an effective way by changing the constitution of the organization, ownership pattern, management structure etc.

History and Meaning of Reorganization

Reorganization is a legal term that refers to the restructuring of a corporation or business entity with the aim of making it more efficient, profitable, or competitive. It involves making changes to the organization's financial structure, management, and ownership patterns, among other things. Reorganization can take different forms, such as mergers and acquisitions, bankruptcy, or divestitures. The purpose of a reorganization is usually to help the organization survive a crisis or adapt to changing market conditions.

Examples of Reorganization

  1. In 2017, General Electric announced plans to reorganize its business operations by selling off certain divisions and focusing on core areas such as aviation and power. The restructuring was aimed at boosting profitability and shareholder value.

  2. In 2010, Delta Airlines emerged from bankruptcy after a successful reorganization that included restructuring its debt, reducing costs, and streamlining operations. The company was able to improve its financial position and become more competitive in the airline industry.

  3. The city of Detroit filed for Chapter 9 bankruptcy in 2013, seeking to reorganize its finances and overcome a $18 billion debt crisis. The city underwent a restructuring that involved reducing pension benefits, cutting services, and renegotiating contracts with creditors.

Legal Terms Similar to Reorganization

  1. Bankruptcy - a legal proceeding that aims to provide relief to individuals or corporations that are unable to pay their debts. Bankruptcy typically involves restructuring of debts and assets to help the debtor regain financial stability.

  2. Merger - a type of reorganization that involves combining two or more companies into a single entity. Mergers allow companies to achieve economies of scale, expand their market share, and take advantage of synergies.

  3. Acquisition - a transaction where one company buys another company, usually with the aim of expanding its operations or gaining access to its technology, products, or services.

  4. Divestiture - a type of reorganization where a company sells off its assets or divisions in order to focus on its core business or to raise capital.

  5. Spin-off - a type of reorganization where a company creates a new, independent entity by selling off a portion of its business. Spin-offs are often used to unlock value for shareholders or to allow the new entity to pursue a different strategy.