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Crisis Management Flashcards

6 cards from real TMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Crisis Management flashcards as text

  1. What is 'succession planning' important for in a crisis situation?

    Answer: Ensuring continuity of leadership if key executives depart during the turnaround

    In a crisis, unexpected executive departures are common; having succession plans ensures leadership continuity so the turnaround is not derailed by the loss of key individuals.

  2. What is a 'carve-out' in the context of DIP financing?

    Answer: A carve-out from the DIP lender's lien allowing payment of professional fees and expenses

    A carve-out provision in a DIP loan allows certain administrative expenses — including professional fees for restructuring advisors and attorneys — to be paid ahead of the DIP lender's claim.

  3. What does 'insolvency' mean in a legal context?

    Answer: A company unable to pay debts as they come due or whose liabilities exceed assets

    Legal insolvency typically means either a company cannot pay debts as they come due (cash flow insolvency) or its total liabilities exceed its total assets (balance sheet insolvency).

  4. What is a 'wind-down' in turnaround terminology?

    Answer: An orderly process of ceasing operations and liquidating a company's assets

    A wind-down is the structured process of ceasing business operations, selling or disposing of assets, settling liabilities, and distributing remaining proceeds to creditors and stakeholders.

  5. What is the role of an 'independent director' during a financial crisis?

    Answer: To provide unbiased oversight and protect the interests of all stakeholders, including creditors

    Independent directors provide objective governance oversight during a crisis, protecting against conflicts of interest between management, equity holders, and creditors.

  6. In a crisis, what is the significance of a 'standstill agreement'?

    Answer: A temporary agreement where creditors agree not to enforce remedies while restructuring is negotiated

    A standstill agreement gives the distressed company and its creditors time to negotiate a restructuring solution by temporarily preventing creditors from accelerating debt or taking legal action.

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