Reshaping a Company’s Board Post-Bankruptcy

Since Russell Reynolds Associates originally reported on board restructuring five years ago, pressures on businesses have only increased. New geopolitical tensions, macroeconomic challenges, elevated interest rates, and technological change are further straining organizations, resulting in a growing number of businesses finding themselves in a stressed or distressed financial position. Bankruptcy filings are at a new high since the GFC, resulting in a surge of company restructurings.¹

Notable in the current environment is the increasing prominence of alternative capital, including private credit. Private credit providers are distributing more flexible and creative capital to struggling companies. Private lending and debt-for-equity transactions have enabled countless organizations to avoid Chapter 11 filings and supported restructurings. Debt-for-equity swaps result in investors managing companies that emerge with a clean balance sheet, but have other complex challenges to address. And unlike private equity or buyout investors, who scope strategic and operational value creation plans during due diligence, these lenders generally have less active management experience.

These combined challenges highlight a pressing need: building an effective corporate board post-restructuring. Yet this is not an easy task. The normal complexity of director recruitment and onboarding, not to mention the effective implementation of corporate governance practices, is only increased as a result of the company’s legal and financial challenges.

Combining insights from our latest work supporting clients who are reestablishing their organizations, as well as recommendations shared by experienced board members, investors and industry professionals, this paper intends to provide a best practice road map for investors and companies looking to build a strong, highly effective board post-restructuring.

Six steps for successful board restructures

The search and selection process for post-bankruptcy boards is more complex than traditional director hires, owing to the size and speed of change required. Most frequently, the board (like the management team) is reconstituted from scratch. This wholesale change removes the institutional, relational and process knowledge typically leveraged to advantage the search process and director onboarding. Additionally, there is a greater need for speed, both in rebuilding and action. The board needs to regain confidence among shareholders, customers, and other stakeholders (e.g., regulators). There is no time to wait; board directors need to be appointed quickly, so they can dig in and begin driving value.

01 Start early

While building the post-bankruptcy board is an incredibly important task, it is often relegated to the end of the to-do list along with items like preparing the disclosure statement or negotiating with other classes of creditors. However, delaying the process risks value erosion if and where involved parties take shortcuts and rush appointments. This often happens in bids to conclude lengthy, sometimes contentious, restructuring processes.

Rather than scrambling, creditors should begin planning for a reconstructed board as soon as they believe they will become controlling shareholders. Early working hypotheses on value creation levers should inform the board’s composition, establish strategic committees at the outset, and influence the type of leadership needed to propel the business forward.

Starting early benefits incoming directors too. With time, they can plan the early work of the board, establish relationships with fellow directors, and get a good understanding of the company and its challenges.

02 Identify a chair

Given that the chair is the board’s most prominent role – helping anchor the board, assisting in recruiting other directors and the management team, and driving the restructuring agenda for shareholders – appointing the right person is critical. Without a strong leader, boards lack accountability and agenda control easily cedes to management.

In most cases, the ideal candidate will be an experienced CEO or chair, or an experienced restructuring professional who served as a board chair during a similar period. This combination of operating and advisory experience enables them to fully counsel the CEO and senior leadership team as the company emerges from bankruptcy.

03 Determine the optimal size

Our advice on board size? Aim small. Small boards increase the focus, engagement, and accountability of each individual director. When you choose the right directors — those who add value, contribute independently, and bring novel ideas to the table — small boards can have an outsized impact.

04 Aim for a varied mix of the right experiences and behaviors

Company turnarounds go beyond balance sheet, operational, and legal issues. There has likely been historic under-investment and talent retention challenges prior to bankruptcy, followed by low morale after the time-consuming bankruptcy process. To navigate these wide-ranging challenges, the board needs strong, capable directors who thrive in high-visibility situations, are comfortable making tough calls, and can bring a diverse and relevant set of experiences. Ideally, board members should bring the following mix of skills:

When building the entire board, it is important to evaluate candidates for every seat. Consider how well individuals will work together, and whether their combined strengths and weaknesses complement the overall board composition.

05 Establish the board culture and set behavioral expectations

Boards with positive cultures promote trust, focus, and embrace new ideas. Directors are deliberate and thoughtful, and more likely to constructively challenge executives when appropriate. While the chair plays a vital role in establishing a strong board culture, our research indicates that the best results are achieved when a group of directors are intentional about building a positive culture.

06 Clearly explain the risks

Directors need to be specialists in areas central to the new owner’s strategic direction for the company. More importantly — as cash compensation tends to be light on post-bankruptcy boards — alignment with the company’s mission, a desire to drive positive impact, and the capacity to devote the appropriate amount of time are all crucial.

Despite the lower cash compensation, the time commitment and workload are heavier than that of a typical independent director role. Directors on post-bankruptcy boards report more meetings, phone calls, outside networking, and involvement with running the business. External public surveys suggest active engagement by board members of a post-restructured company can require at least 50% more time than public company directors.²

Compared to other circumstances, director remuneration skews toward equity-heavy compensation packages and multi-year vesting schedules. While there are many benefits to serving on post-bankruptcy boards, candidates should reflect on whether they are a good match for their operating terms and long-term expectations.

 

		Client Situation A leading national healthcare group that filed one of the largest bankruptcies since the GFC. Financial pressures stemmed from COVID-19 impacts, insurance payor delays, and regulatory uncertainties. Despite these challenges, the company maintained normal operations and patient care standards throughout the restructuring process.
		RRA Solution Our teams from healthcare, private credit, financial officers, and technology officers partnered with the Creditors’ Committee starting in mid-2023 to rebuild the company’s board and then leadership team. This comprehensive effort included appointing a chair, full board of directors and multiple C-suite roles, as well as recruiting crucial senior management roles. These placements – a total of 13 to date – have been critical in guiding the strategic direction of the organization as it enters its post-bankruptcy chapter focused on growth.
		Challenges we navigated Stakeholder management of an adhoc Creditors’ Committee comprised of several major shareholders. Balancing the requirement of individual roles with the entire board composition. We first identified the best chair, followed by five board directors, CEO, and additional C-Suite roles.
		Key Takeaways Processes need to be nimble and dynamic. Consensus needs to be secured early. Keep multiple workstreams in mind and sequence them appropriately to secure the best outcome for the owners and company.

 

 

		Client Fund Situation As recent inflation compels central banks to raise the cost of debt, businesses previously acquired through buyouts with (relatively cheaper) leverage now face headwinds in being able to reservice debt. Sponsors are increasingly looking towards operational efforts in the form of deep value creation or outright restructurings to support their trouble portfolio companies. As such, credit funds are mirroring their buyout peers in building out their inhouse capabilities.
		RRA Solution We have partnered not only with traditional private equity but with credit arms to build out value creation capabilities. Our best placed candidates come from restructuring or Workout Groups.

 

What’s next?

With today’s surge in bankruptcies and high volume of restructurings likely continuing throughout 2025, it is clear that some companies will thrive while others will falter.

Appointing a high-performing board is critical to value enhancement post-restructuring. By starting early, thinking clearly about the structure and composition of the board, and thoughtfully compensating and onboarding directors, companies have an opportunity to build a high-performing board that creates strong positive results for the company and its stakeholders.

Authors

Heather Hammond co-leads the Global Private Capital Practice for Russell Reynolds Associates. She is based in New York.
Noah Schwarz is a Managing Director and Global Head of Private Credit. He is based in New York.
Emily Taylor co-leads the Global Private Capital Practice for Russell Reynolds Associates. She is based in New York and London.
Courtney Byrne is a member of the Private Capital Knowledge team. She is based in London.

Footnotes

_{¹Nick Lazzaro and Annie Sabater. "US corporate bankruptcies soar to 14-year high in 2024; 61 filings in December." S&P Global, 2025. https://spglobal.com
²Jon Weber and Alvaro Aguirre. "7 Deadly Sins of Post-Restructured Boards." Private Directors Association, 2024. https://privatedirectors.org}