Aug 01 ‘22 6 min read
The coronavirus crisis hit quite many businesses around the world. Many companies didn’t manage to survive the lockdown and the harsh conditions they put entrepreneurs in. The airline, offline retail, and restaurant industries have suffered the most from the worldwide quarantine. But other fields are also experiencing rather significant financial stress. So bankruptcy happens quite frequently today.
Virtual data rooms are already widely used by financial institutions to manage documents internally and during such processes as mergers and acquisitions, IPO, real estate transactions, and so on.
However, this tool can be used during bankruptcy and restructuring too. In fact, a law firm using virtual data rooms for restructuring processes can enjoy the ease and security of working with data, despite having to share it with multiple parties though.
However, security and ease of use are only a few benefits of data rooms for bankruptcy and restructuring. Keep reading to discover more.
1. Due diligence made easy
Due diligence is an essential part of perhaps any business process, and it lies at the core of bankruptcy proceedings. Often, businesses tend to underestimate the importance of due diligence, and that’s a mistake. A company must share a lot of documents during bankruptcy, but it also needs to protect these files from data leaks. Applying for bankruptcy doesn’t mean you shouldn’t care about security anymore.
A virtual data room can solve both document exchange and security-related issues by providing a company with a protected platform to manage and share sensitive data. Once all the required documents are uploaded to the virtual data room, court-appointed trustees or bankruptcy attorneys can thoroughly study them at a comfortable pace to determine the highest possible price for business assets.
2. Easy uploading and data indexing
Most virtual data room providers allow users to upload files in bulk with a drag-and-drop feature. Thus, you can preserve the folders’ structure if you already have one and avoid the hassle of uploading all documents at once. Additionally, a VDR usually indexes the data automatically, making the search faster and easier for users. Almost every virtual data room offers an OCR search that will let parties find specific information, even in PDF files and images.
3. Round-the-clock access to the storage
The parties are not limited by office hours when it comes to reviewing the documents. They can access the data room at any moment they need and from any device as most providers make their software compatible with all operating systems. Thus, trustees or liquidators can perform due diligence with the help of a data room even if they’re located in the other part of the world away from a company that goes bankrupt.
4. Improved communication
Stakeholders can leave notes and highlight certain parts of documents to clarify details. Moreover, trustees and liquidators can ask questions and find answers in a Q&A section that keeps all the vital information centralized and easy to work with. A business can gather frequently asked questions before bankruptcy and answer them to speed up the review process.
5. Insightful reports
Thanks to the reports, a business can see which documents are users reviewing and for how long. This information can both help a company spot suspicious behavior and get valuable insights on how to get the most out of the bankruptcy process. Virtual data room reports provide businesses with a bigger picture and a better understanding of the situation.
6. Protection against data breaches
Data leaks are still a huge threat during the bankruptcy process. And a business should keep protecting its corporate information to avoid any complications. Virtual data rooms offer impeccable security for all the files uploaded to it.
7. Protected repositories and data transfer ways
VDR providers use the most reliable bank-grade encryption to safeguard both the cloud storage with files and ways to distribute information. Thus, you can be sure documents won’t get stolen or intercepted when you or other users are uploading and downloading them.
8. Multi-factor authentication
The most significant part of all the data leaks happens because of a human mistake — when some user accidentally or intentionally discloses the login details to a malefactor. Multi-factor authentication requires users to take one more step besides entering the login and password to access a virtual data room. For example, a person will have to enter a unique code sent to their mobile phone upon logging in. Therefore, even if a malefactor knows login details, they still can’t enter the repository.
9. Access control
Data rooms allow a business to control access invited parties have. It means that you can grant trustees and liquidators only the ability to view the documents because they don’t need to do much more with sensitive information during bankruptcy. Thus, you will be sure they don’t disclose your files to any other parties. And once the procedure is over, you can simply terminate their access to your data room.
10. Complete transparency
While all parties involved don’t know about each other, you can see their every move in the data room, thanks to the reports. Using them, you can spot unusual behavior and prevent a data leak. Of course, you can also use this information to make data-based decisions during the bankruptcy process.
What to consider when choosing data rooms for restructuring
To make the complex restructuring process as easy as possible, you should consider a few essential things to choose the best VDR provider. Make sure you choose a provider that:
- Has a good deal of previous experience in working with law firms and managing insolvency projects.
- Delivers a simple interface and is easy to use for non-tech-savvy teams.
- Allows for complete control of users and documents through a comprehensive reporting system.
- Is scalable and safe, allowing different parties making bankruptcy and restructuring projects to keep files and communications within their data room secure.
- Offers clear and flexible pricing for the virtual data room software without pitfalls.
Besides that, bankruptcy and restructuring data rooms should necessarily follow government guidelines. Among the most important, there are ISO 27001, SOC 2, HIPAA, GDPR, and others.
Virtual data rooms will protect your critical information and simplify its distribution during the bankruptcy process or the sale of distressed assets. However, you will find this tool useful when everything is over if you need to go through the corporate restructuring process or acquisition.
Since all the documents will be already uploaded to the data room and available, it will be effortless to share data and speed up all the further processes. While your corporate information remains accessible to authorized users, it’s also perfectly safe and you can focus on growth initiatives.
As a state-of-the-art technology, a virtual data room solves the biggest challenge of maintaining security without sacrificing fast and flexible access. If you feel that virtual data rooms are what you need, then visit our main page. It contains valuable information for choosing the best data room service for restructuring processes.