A recapitalisation restructures ownership and debt, used to bring in investors, to provide liquidity, or to resolve a deadlock.
Common structures. Creating a new class of preferred for an investor; splitting common into voting and non-voting classes for succession purposes; converting debt to equity; a leveraged recapitalisation distributing proceeds to owners; and a reverse split combined with a cash-out of small holders.
Approvals. Charter amendment, class votes where a class is adversely affected, and the contractual consents in any shareholder agreement.
Fiduciary duties. Where a controlling owner is on both sides, the transaction receives heightened scrutiny, and process protections — an independent committee, an independent financial adviser, a fully informed vote of the disinterested holders — are what defend it.
Disclosure to all holders of the terms and the alternatives considered.
Valuation. An independent valuation supporting the exchange ratios and the pricing, particularly where holders are cashed out.
Tax. Recapitalisations can qualify as tax-free reorganisations if structured within the requirements, and can produce ordinary income if not.
Appraisal rights where the transaction is effected by merger.
Documentation. Amended charter, amended agreements, new certificates, and an updated capitalisation table reconciled to the documents.