Corporate reorganization can be defined as the act or process by which the organization and existing interests of a corporation is changed. Reorganization usually occurs as a result of financial difficulties under the existing corporate structure, operation, or management, and often as an alternative to dissolution. It may consist of changes within an existing corporation, such as recapitalization; it may involve transactions with another existing corporation, such as a transfer of stock or assets in exchange for voting stock; or it may involve the formation of a new corporation to take over the business of the old one.
Corporate reorganizations may be either judicial or nonjudicial. Judicial reorganization can be voluntary or involuntary. Judicial reorganizations may be carried out through receivership, judicial sale, and other equitable procedures, but most judicial reorganizations are carried out under the "reorganization" provisions of Chapter 11 of the Bankruptcy Code A nonjudicial reorganization is one conduct5ed by agreement between the interested parties.
Corporate reorganizations may qualify for partial or complete tax-free treatment where they satisfy special requirements of the Internal Revenue Code.
