Reorganization Law and Legal Definition

Reorganization, in the corporate context, refers to the initiation of a plan to restructure a corporation. such restructuring may involve one company being merged with another.

In the context of bankruptcy, a corporation with serious financial difficulties may be given time to reorganize while being protected from creditors by the bankruptcy court. The court aims to help a company with a viable plan to make money an opportunity to attempt repayment to creditors, who might otherwise be left with no assets to collect from. Chapter 11 of the Bankruptcy Code provides a process for rehabilitating the company's faltering business. Sometimes the company successfully works out a plan to return to profitability; sometimes, in the end, it liquidates. Under a Chapter 11 reorganization, a company usually keeps doing business and its stock and bonds may continue to trade in our securities markets.