What is meant by Corporate Crisis?

We speak of a Corporate Crisis when there is the current inability of the company to generate cash flows, both in the present and in a future prospective, sufficient to guarantee the fulfillment of the obligations already undertaken and those planned.

In this perspective, from an economic-financial point of view, the state of company crisis can be defined as the situation of incapacity, tendential and temporary of the company, measurable beforehand in terms of probability, to generate continuously adequate operating cash flow.

The most frequent indicators of the state of crisis in a company consist of any liquidity crisis, usually attributable to an unbalanced financial structure or incorrect management of working capital, as well as the entity of the company’s shareholders’ equity which must not be negative and, more generally, the calculation of the DSCR (Debt Service Coverage Ratio), i.e. an index based on the use of prognostic data, functional to establish the company’s ability to repay interest and installments – loan capital.

These situations, if not well managed, can lead to compromising business continuity and lead to a real state of insolvency which represents the outcome of a crisis that has become irreversible.

Corporate Crisis Lawyer: why does it become necessary to refer to one?

Primarily, a company needs a lawyer specialized in Corporate Crisis to analyze the state of the company from the point of view of the crisis. Following this verification, the lawyer proposes legal solutions in accordance with current legislation to avoid, not only that the worsening of the crisis leads to actual insolvency, but also and above all for the specific purpose of remedying and/or resolving the state of “crisis” by bringing the company back to performing status.

In addition, the lawyer evaluates the company’s policy choices in legal terms, assesses the legal consequences of management decisions and, finally, advises the entrepreneur on specific strategies for overcoming the state of crisis, having regard to the national and international legislation applicable.

Our firm deals with corporate debt restructuring, not only in terms of the reduction/restructuring of bank and financial debt, but also regarding the restructuring of tax debts and in dealing with the relations with suppliers.

When to contact an expert?

A company should contact an expert to prevent corporate crisis or alternatively to remedy the crisis that has already occurred or is about to occur and avoid further damage or possible insolvency. Obviously, the assistance of an expert lawyer is increasingly necessary when the company is already in the state of business crisis.