Navigating and managing corporate bankruptcy calls for secure, well-equipped technology. And virtual data room software offers companies across all sectors a sufficient toolset to approach complex projects confidently.
What Are Bankruptcy and Restructuring Processes?
The economic turbulence of the past few years has driven companies to make uneasy decisions. Some undergo the filing for the bankruptcy process. Others completely revise the way they manage business and approach clients’ transactions.
But the concepts of both bankruptcy and restructuring aren’t new. They have been around as long as the corporate business scene itself.
- Bankruptcy definition
Bankruptcy is a legal procedure that takes place when a business is no longer capable of repaying its debts. The bankruptcy filing process implies the evaluation of distressed assets, collecting numerous documents, and collaborating with law firms. The sheer complexity of such procedures can be very challenging, making bankruptcy a worst-case scenario for any company.
Perhaps, the biggest challenge of bankruptcy is managing insolvency projects – finding solutions to repay debt without having sufficient funds.
Restructuring, on the other hand, is not necessarily negative. Although some businesses restructure due to an acquisition, others do it to better appeal to their customers and establish a more sustainable business model.
- Restructuring definition
Restructuring is a series of processes aimed at changing the organizational system of businesses. To successfully restructure, companies must undergo several stages, such as strategizing, analysis, and testing.
The Role of Virtual Data Rooms in Bankruptcy and Restructuring
Virtual data room technology revolutionized the way companies approach complex deal processing. A thoroughly organized data room is an excellent platform to navigate M&A, due diligence, board communications, and more.
Virtual data room software offers solutions to process documents, protect confidential information, share data with all the parties involved, and configure flexible access specifications for authorized users. Additionally, data room users save time and money by transitioning to the digital storage space and remote decision making.
In the case of restructuring, there are five significant challenges that VDR tools help to address.
| № | 5 main restructuring challenges | VDR solutions |
| 1 | Coordinating a large number of stakeholders and other parties | Set personalized usage rights for different parties, such as banks, creditors, court-appointed trustees, and lawyers.Manage the business operations through calibrated or predefined workflows.Divide projects into milestones.Assign tasks to the team members. |
| 2 | Transferring traditionally in-person procedures into the virtual space | Digitize the communication processes with online chatting, video conferencing, and email services integrations. Allow users to upload, access, and documents from different locations.Transfer the physical document repository to a secure cloud. |
| 3 | Operating with escalated document volumes and versatile file formats | Utilize due diligence checklists for gathering the required files.Operate with various formats and editing tools online and offline.Apply automatic indexing and labeling to all the documents.Ask the support team to archive closed projects. |
| 4 | Complying with strict regulations | Align documentation security controls with the industry-dictated regulation.Monitor data room activity via detailed reports and analytics. |
| 5 | Securing sensitive data | Manage who, when, and how can access all the files.Assign project managers and administrators to take charge of data security. |
The Stages of Using a Virtual Data Room for Corporate Restructuring
Data rooms allow businesses to navigate any complex process faster and easier. And when it comes to restructuring projects, virtual data room technology is a must-have at every stage.
1. Strategy
The very first step of the time-consuming and complex restructuring process is to establish why it has to be done in the first place. The decision-makers will seek assistance in evaluating assets, defining the new focus, performing due diligence, and visualizing the upcoming action plan.
- VDR advantage. At this stage, a data room will provide the required security to exchange sensitive information and effortlessly collaborate with multiple parties.
2. Planning
This stage is concentrated on bringing the strategic vision into practice by defining the specific transactions and processes that need to happen. The general goal of restructuring is to increase the profit and improve its position in clients’ eyes. All actions, including communications, budget allocation, and assigning people responsible for project managing, must align with that goal.
- VDR advantage. A data room allows saving time by centralizing all documents and people in one equipped space. All parties can share sensitive data, work on collective decisions, and overlook their parts of the project.
3. Test implementation
Once the transaction roadmap is outlined, the restructuring business will implement the strategy on a small scale. For smaller companies, this would mean testing out the new format in a single division. And for international enterprises, it typically translates into applying the changes on a regional level.
- VDR advantage. Companies can use the virtual data room to monitor the test stage and gather insights. At the same time, affected parties will be able to submit their input and suggest improvements.
4. Assessment and analysis
After the initial testing is complete, the company will assess the gathered data to evaluate its alignment with the initial targets. It is imperative that the project manager finds a way to consider and deal with all types of feedback and channel it into a new, updated plan.
- VDR advantage. Once again, a secure data room is a great solution for gathering and securing information. On top of that, a VDR can automate analytics, presenting the decision-makers with easy-to-apply statistics.
5. Implementation
Once all the restructuring processes have been fine-tuned and tested out, it is time to implement the new approach on the maximum scale. The assigned project managers will stay in their roles to address all the arising challenges and continue introducing strategy improvements until the management releases them.
- VDR advantage. A data room offers all the necessary instruments for managing and assessing any process. Once the restructuring is complete, it is possible to reorganize the data room space for other projects or general internal management.
At every step of the way, it is crucial to consult with a law firm, an investment bank, and the necessary financial institutions to ensure that the restructuring process aligns with long-term vision and stability.
Virtual Data Room Benefits for Bankruptcy and Restructuring
Below is a brief summary of the bankruptcy and restructuring data room benefits.
Data centralization and security
Once all the documents are gathered in the data room, it is much easier to operate and monitor them. The administrators can use various document organization tools, such as text search or secure view. Additionally, virtual data rooms allow checking who and when downloaded different files, which gives deal processors more control over the bankruptcy proceedings.
Access control
Administrative users can control access to the documents on various levels, including a role in the company, specific responsibilities, IP location, etc. As companies typically deal with many third parties during bankruptcy and restructuring transactions, sophisticated access security translates to the overall effectiveness of the virtual data room.
Enhanced communication
Tools like built-in chats, Q&A, and integrated video conferencing make internal communications secure and convenient. All parties can safely collaborate inside the data room, managing the bankruptcy or restructuring processes from any comfortable device and location.
Accelerated due diligence
Virtual data rooms have a proven record of speeding up the due diligence process. The combination of document centralization and transparency allows anyone from employees to bankruptcy attorneys to retrieve the necessary data.
Reporting and analytics
Data room analysis tools provide access to documents that summarize all the transaction processes, including user activity and progress updates.
How to Select a Virtual Data Room Provider for Bankruptcy and Restructuring
To select the right technology for restructuring, bankruptcy, or any other complex corporate process, your company must evaluate and compare several VDR providers. Consider the following criteria to streamline the comparison process.
Sufficient experience
Previous experience and expertise in bankruptcy and restructuring guarantee your deal to go smoothly. Make sure to inquire about particularly tricky scenarios such as insolvency or international restructuring.
User-friendly interface and versatile features
Easy-to-navigate virtual data rooms come with limitless benefits. With an intuitive interface, you can access the necessary documents, organize the work process, and connect with people without complications.
Compliances and certifications
Data room security requirements are dictated by several standard systems, such as:
- ISO 27001
- HIPAA
- GDPR
- SOC 2, and others
Apart from ensuring that the provider you are considering complies with your industry’s regulations, ask them about the auditing process. Reputable virtual data room companies usually undergo constant third-party audits by independent organizations.
Customer support
An approachable and helpful support team is a great asset to your business. Look for providers who guarantee 24/7/365 availability via various channels and the capacity to communicate in several languages.
Pricing
Data room budgets vary from one company to another. Aim for providers with flexible pricing in case you will need to upgrade or downgrade the software in the future.
Essential Data Room Features for Bankruptcy and Restructuring
Before embarking on the search for the best VDR provider, here are the essential data room features that assist during bankruptcy and restructuring.
Intuitive and customizable user interface
As mentioned before, a modern and organized data room can save time and allow users to focus on their responsibilities rather than technology navigation.
- Pro tip. The most effective ways to evaluate interface intuitiveness are through reading verified user reviews or requesting a free software trial.
Vast format support
Restructuring processes always circulate around large volumes of various-format files. The data room must provide all the necessary instruments for processing documents and other records regardless of their nature.
Dynamic watermarking
Contemporary technology allows to secure documents with complex watermarks that prevent the unsolicited spread of sensitive information.
Group permissions
Group access settings make it easier to process the data room setup. Administrators can assign the privileges based on department, seniority level, or any other criteria that unite several individuals with the same purpose.
Granular user permissions
Individually configured access permissions further secure the VDR and intensify the feeling of confidence among everyone involved.
- Pro tip: The ‘View as’ function helps ensure that all contributors have the appropriate permissions to fulfill their duties without compromising security.
Two-factor authentication
Consistent user verification is the best way to ensure critical information remains safe. Depending on the provider, the multi-step authentication will comprise of complex passwords and a code sent via email or text message.
Encryption
The data is secure when it is encrypted. The 256-bit SSL encryption guarantees data safety at rest. And other security controls, such as the TLS protocol, protect it during transfers.
