Restructuring is a corporate action undertaken by an organization to significantly change its financial or operational structure, generally when it is under monetary duress. Companies may also restructure when preparing for a sale, buyout, merger, change in overall goals, or transfer of ownership.
Forms of Corporate Restructuring are
- Mergers/amalgamations
- Acquisitions/takeovers
- Financial restructuring
- Divestitures/demergers
- Buy-outs
Companies restructure for a variety of reasons:
- To reduce costs
- To concentrate on key products or accounts
- To incorporate new technology
- To make better use of talent
- To improve competitive advantage
- To spin off a subsidiary company
- To merge with another company
- To decrease or consolidate debt.
Benefits of Restructuring a Company
Just as there are various reasons an organization might restructure, there are various benefits of restructuring a company. Some benefits are monetary, such as reviving a declining business, increasing a company’s value, and preparing it for sale or transfer to the further generation. Alternative benefits include gaining a competitive advantage, such as serving an organization position itself for growth, giving the addition of the latest accounts, or enabling expansion into alternative geographical areas. Two words, however, add up the overall benefits of corporate restructuring: survival and success.
If capital gains arise on transfer of any capital asset in the scheme of amalgamation, by an amalgamating company to the amalgamated company, such capital gains shall be exempt from tax provided the amalgamated company is Indian..
Process of the Corporate Restructuring
The time it takes to complete the organization restructuring technique will rely upon whether the restructuring is reactionary, like once bankruptcy proceedings require a company to make explicit changes within a specified period, or proactive, such as when a savvy business leader recognizes a change in consumer preferences and wants to position his or her company to be a leader in tomorrow’s market. Regardless of the reason for a company’s restructure, excellent design is crucial. Enlisting the guidance of a qualified professional at the planning stage is critical to ensure a successful restructure.
The corporate restructuring process falls into the following stages:
- Determining what areas need to be restructured
- Identifying weaknesses and creating detailed short- and long-term plans to correct these weaknesses through a restructure
- Implementing short-term corrective action
- Calculating and securing funding
- Restructuring
- Evaluating results
Often companies do not allow enough time for planning and implementing the restructure. A restructuring involves details concerning vendors and consumers, stockholders and financial relationships, employees and inventory, quality control and environmental impact, equipment and technology, and management and marketing. All of these areas need careful thought and consideration to determine how organization restructuring will affect everyone.
Conclusion
Unwritten rules (synonyms: Unspoken rules) are behavioral constraints imposed in organizations or societies that are not voiced or written down. They usually exist in unspoken and unwritten format because they form a part of the logical argument or course of action implied by tacit assumptions. Companies face many difficulties dealing with the frequent changes in today’s economy, and company restructuring can be a short and long-term answer to maintaining organization viability. Whether the reason for company restructuring is to save the business or strategically reposition itself for the future, the Business Setup Worldwide can help business owners’ deal with these challenging issues. Contact us today to learn more.
