Recapitalization is a process that takes place when an organization restructures its debt and equity mixture in order to make the capital structure of the organization stable. A recapitalization agreement is a corporate contract drafted whenever a corporate organization decides to restructure its capital structure. The agreement gives out the process in which the restructuring will be done.
There are few provisions in a recapitalization agreement that helps to understand the purpose of the agreement. They are follows:
- Share authorization: The agreement states the details of the individual who authorizes the shares. The company can authorize only that amount of shares that is mentioned in the agreement.
- Delivery and closing: In order to make the recapitalization effective, the deal must be closed and documents should be signed. The agreement states the place and time of closing the deal. The conditions of closing the deal are also stated in the agreement.
- Warranties of stakeholders: The stakeholder should make certain promises to the company.
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