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It depends. Under US bankruptcy laws corporations can file for bankruptcy for the purpose of reorganization of debts (chapter 11) or for liquidation (chapter 7

It depends. Under US bankruptcy laws corporations can file for bankruptcy for the purpose of reorganization of debts (chapter 11) or for liquidation (chapter 7). Under reorganization the expectation is that you are trying to rehabilitate a failing business that may be profitable again - so the business continues running, and can even borrow money - though your business actions are monitored and ultimately may be approved by the court. Under liquidation, you auction off everything that isn’t bolted down (and some things that are). You usually restructure businesses that could emerge from bankruptcy and be profitable again, and liquidate those that can’t. Which one Twitter may be can be debated.

jamestimmins 4y ago
So in this case, would Elon have to file for bankruptcy and then sell it to someone else to restructure it? If so, what happens with the cash, since I assume the debt-holders have been wiped out?
- owenmarshall 4y ago
  To restructure he wouldn’t necessarily need to sell: basically, Twitter would put out a restructuring plan that shows how they’re going to fairly pay creditors and bring the business back to profitability. Sometimes that means reducing operations and selling off parts of your business. It often means creditors taking a haircut - because 25% or 50% beats 0%. This often comes in equity in the restructured company in exchange for creditors waiving their claims. Here’s the rub, though: in chapter 11, the courts have a huge role. They approve your restructuring plan only if it’s fair to your creditors. They have to green light quite a few actions you might want to take in the course of running your business. They might form a creditors committee out of the people you owe money to and take their advice on decisions. It’s a long and drawn out process that requires calm leadership willing to work with ones “adversaries” to come to an agreement. And no matter your opinion on Elon, positive or negative, I doubt many people would say his reign at Twitter suggests he’d do that.

jamestimmins 4y ago

So in this case, would Elon have to file for bankruptcy and then sell it to someone else to restructure it? If so, what happens with the cash, since I assume the debt-holders have been wiped out?

owenmarshall 4y ago
To restructure he wouldn’t necessarily need to sell: basically, Twitter would put out a restructuring plan that shows how they’re going to fairly pay creditors and bring the business back to profitability. Sometimes that means reducing operations and selling off parts of your business. It often means creditors taking a haircut - because 25% or 50% beats 0%. This often comes in equity in the restructured company in exchange for creditors waiving their claims. Here’s the rub, though: in chapter 11, the courts have a huge role. They approve your restructuring plan only if it’s fair to your creditors. They have to green light quite a few actions you might want to take in the course of running your business. They might form a creditors committee out of the people you owe money to and take their advice on decisions. It’s a long and drawn out process that requires calm leadership willing to work with ones “adversaries” to come to an agreement. And no matter your opinion on Elon, positive or negative, I doubt many people would say his reign at Twitter suggests he’d do that.