What are the main points of company insolvency/bankruptcy?
At this time last year, no one would have imagined that large financial institutions would go bankrupt. But this is a great opportunity to understand the Insolvency program of a large financial institution.
First of all, students can pay attention to the five main types of Insolvency Procedures:
1️⃣ Reorganization
2️⃣ Voluntary liquidation
3️⃣ Compulsory Liquidation
4️⃣ Statutory intervention
5️⃣ M&A for rescue
✅ Where will the bankruptcy proceedings be?
📌 First day: If the firm is liquidated or legally intervened, the Insolvency Practitioner (IP) will obtain a comprehensive understanding of the company's situation. All the accounts, records, major assets of the company, and the existing management's powers are transferred to IP. In addition, IP will replace the HR department, as all employee contracts have been automatically terminated (IP decides whether to selectively retain certain employees on short-term contracts)
📌 First week: IP talks to the management, confirms list of all relevant stakeholders), taking stock of the latest financial situation and urgent issues (for example, assets are threatened), and dealing with legal obligations
📌 The first month: IP needs to decide whether to liquidate immediately or to implement an orderly shutdown (the company needs to maintain all operations in a short period of time, instead of immediately closing down and burying everyone. At the same time, start selling key assets, hoping to sell individual maximum price) is usually a better approach for sensitive businesses as the firm valuation can drop significantly once management ceases
🤔And SVB is actually implementing tight and orderly closure. On the one hand, the Fed transfers SVB's deposits to bridge banks operated by the Federal Deposit Insurance Corporation (FDIC) and manages them. It is also supposed to manage other business units of SVB behind the scenes. On the other hand, they have been actively promoting SVB's business. I believe everyone knows that SVB's UK business has been sold to HSBC.
📌 Later: The IP strategy will be implemented. Sell assets, manage businesses, and pay off creditors. If necessary, company affairs will investigated.
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