Smart Restructuring Tokens

In this paper, we offer a restructuring solution for any firm that issues financial assets in tokenised form. We draw on the automated contractual restructuring proposals that were widely discussed at the beginning of the 1990. Based on blockchain’s smart contract capability, we suggest the creation of smart equity and debt tokens with an embedded restructuring function, that if triggered will automatically provide the issuing firm with a reduced debt load and a more sustainable capital structure. Because investors will be much better able to appreciate their treatment in the restructuring context, the cost of capital for firms using our model should be much reduced. In addition to offering a scholarly discussion and legal analysis of the proposed solution, the paper forms the basis for an actual smart contract suite that technically implements the proposal.