What is Corporate Restructuring:
Corporate restructuring is an action taken by the corporate entity to modify its capital structure or its operations significantly for the purpose of making it more profitable, or better organized for its present needs.
Why Corporate Restructuring:
The process of corporate restructuring essentially involves significant reorganization of assets and liabilities of the organization so as to conduct the business operations in an efficient, effective and competitive manner with the underlying objective of improving the quality and quantity of the future cash flow.
Forms of Corporate Restructuring:
The most common forms of corporate restructuring are as under:
This is the concept where two or more business entities are merged together either by way of absorption or amalgamation or by forming of a new company. The merger of two or more business entities is generally done by exchange of securities between the acquiring and the target company.
Under this corporate restructuring strategy, two or more companies are combined into a single company to get the benefit of synergy arising out of such a merger.
- Reverse Merger:
In this strategy, the unlisted public companies have the opportunity to convert into a listed public company, without opting for IPO (Initial Public offer). In this strategy, the private company acquires a majority shareholding in the public company with its own name.
When a corporate entity sells out or liquidates an asset or subsidiary, it is known as “divestiture”.
Under this strategy, the acquiring company takes overall control of the target company. It is also known as the Acquisition.
- Joint Venture (JV):
Under this strategy, an entity is formed by two or more companies to undertake financial act together. The entity created is called the Joint Venture. Both the parties agree to contribute in proportion as agreed to form a new entity and also share the expenses, revenues and control of the company.
- Strategic Alliance:
Under this strategy, two or more entities enter into an agreement to collaborate with each other, in order to achieve certain objectives while still acting as independent organisations.
- Slump Sale: Under this strategy, an entity transfers its one or more undertaking for lump sum consideration. Under Slump Sale, an undertaking is sold for a consideration irrespective of the individual values of the assets or liabilities of the undertaking.
Services under Corporate Restructuring:
- Planning strategies for amalgamation/merger, acquisition, takeover, spin off, reconstruction, reorganisation, restructuring and winding up of companies.
- Change of name, change of objects and shifting of registered office of the company.
- Drafting schemes of amalgamation or arrangement, public offer for acquisition or takeover, and Promoters Agreement.
- Complying with necessary legal and procedural requirements.
- Advising the management on post restructured scenario.