corporate reorganization

The act or process of organizing again or anew to effect a corporate readjustment of existing interests, almost invariably involving a corporation in financial distress or in a condition of inability to compete in the commercial world. 19 Am J2d Corp §§ 1515 et seq. A means whereby those variously interested financially in a distressed corporation seek, through continuance of the business as a going concern, to work out of the difficulty for themselves and thus gain more than they could by a sale of the assets or of the business to others. Warner Bros. Pictures, Inc. v Lawton-Byrne-Bruner Ins. Agency Co. (CA8 Mo) 79 F2d 804. Often accomplished by a judicial sale of the corporate property and franchises and the formation by the purchasers of a new corporation in which the property and franchises are thereupon vested, and the stock and bonds of which are divided among such of the parties interested in the old company as are parties to the plan of reorganization. 19 Am J2d Corp § 1515. A proceeding in the bankruptcy court to obtain a change in the capital structure, a reduction of indebtedness, and other permissible changes to rehabilitate a failing corporation and promote the prospects of creditors to obtain a full realization of their claims or a better realization than would occur through immediate realization. 9 Am J2d Bankr § 1496.