structure is 8 "reorganization."
We find thst the above quoted. from Texas Jurisprudenceis not supportedby the cases cited therein.
At 15 Fletcher'sCyclopediaCorporations,Section201, page 318 (1938revisedvolume),it is demonstratedthat the term "reorgani- zation"has many meanings.
"The term 'reorganization' signifiesthe act or proc- ess of organieinganew. As anpliedto corporations,it denotesvariousproceedingsand transactionsby which a successionof corporationsis broughtabout. Ordinarily it involvesthe creationof a new corporationto take over the assetsand propertyand continuethe businessof the old. This, however,is not necessarilythe effect of a reorganization.The terms of the statuteand the inten- tion of the Legislatureand of the partiesmay be merely to continuethe existingcorporation,without dissolution, under the same or differentname and with the same or dif- ferentpowers,and under the 881116)or a differentmanage- ment. Accordingto Mr. Morawetz, the term 'reorganization' is 'commonlyappliedto the formationof a new corporation by the creditorsand shareholdersof a corporationwhich is in financialdifficulties, for the purposeof purchasing the company'sworks and other propertyafter the foreclo- sure of a mortgageor judicialsale'. .
"It is proper to classifyreorganizations as (1) re- organizationsin connectionwith the foreclosureof corpo- rate mortgages,or in connectionwith other judicialor executionsales of the corporatepropertyby the purchasers at the sale, and (2) other reorganizationsor reincorpora- tions. The latter class is divisibleinto (a) reincorpora- tions where the purpose is merely to correctillegalities or defectsin the originalincorporation, or to broadenthe scope of the powers of the corporation,including,in one sense of the word, the amendmentas well as the extension or revivalof charters;(b) the scalingof securitiesby voluntaryagreementsand (c) the organization, primarily by or on behslf of the stockholdersas distinguishedfrom the creditors,of 8 new corporation,without8ny forced sale, to take over the propertyof the existingcorporation. The term is used most often in connectionwith the foreclosure Hon. WilliamM. King, page 8 (UW-504)
of corporatemortg8geSwhere 8 new corporationis formed by the foreclosurepurchases,and most of the law, as laid down in the decision,in connectionwith reorganizations, relatesto the first class of reorg8nization,and much of such law is not applicableto other reorganizations.
"The reasons inducing8 reorganization are not in every case the same,but for the most part they are to be found in the weak financialor insolventconditionof the p8rticul8rcorporation.And so the aim of a corporatere- organizstionis generallyto put the companyupon a sound finsncialbasis,and to enable it to take care of it8 ob- ligations,therebyavoidingllquld8tlonor bsnkruptcy. But in Some cases 8 reorganization IS effected,notwith- standingthe corpor8tiOnIS SolVent. Very often 8 'sound enterprise,earningan adequatereturn,will be hampered by 8n unsound finsnclalStructureinvolvingexcessivefixed charges,such 8s bond Interest;or again the difficultyof refunding8 materialbonded indebtednessduring8 time of financialstringency,or the urgent need of additionalcapi- tal for improvements, or the weight of an unfundeddebt will make 8 reorganization necessary.
"The reorganization of an Insolventbusinessinvolves considerationsnot presentin the reorganization of a sol- vent one. Almost alxaysthe 18tter is 8 matter of purely businesspolicy not intendedto nor resultingin dieturb- ante of existinglegal rights of creditorsor Stockholders. It Is carriedthrough in strictconformitywith Such rights, the purposebeing to better an existingcondition. The former is compelledby the ineXOr8blelogic of 8 bad situa- tion, is designedto save 8s much 8s possiblefrom impending wreckage,8IId8lw8yS inYOlYeSchange8in the existinglegal rights of some, if not all',of those having rights in