Companies can experience a period where they consider whether is is viable to proceed with operation or file for bankruptcy. If, after careful consideration of circumstances, the former is the best business decision, the course of action is corporate restructuring. This involves a focused effort to analyse existing business strategies and devise mechanisms to create or revise new approaches to improve and increase the company’s profitability.
This is an effort that involves close attention to company resources, processes, responsibilities, people and other aspects of the business. This is aimed at increasing profitability while decreasing liabilities and costs.
Corporate restructuring is needed when a risk of failure or default is becoming apparent. When the risks can still be managed and there’s a possibility of turning things around, corporate restructuring becomes the best approach to take. With contingency planning this solution will be effective.
When corporate restructuring is taken into consideration to save a company, the evaluation process involves a thorough valuation analysis, assets identification and assessment, and other alternatives that can contribute to avoid bankruptcy.
The corporate restructuring process can include a careful and thorough evaluation of the cash flow dynamics and some economics related to the company operation. It also involves an evaluation of the management structure and the business models adopted by the company.
The process can also result to financial restructuring, with the goal of improving cash flows and bottom line. In some cases, this can lead to refinancing and inclusion of additional capitalization, if needed, as a result of the financial study. At the worst scenario, the restructuring can also give way to bankruptcy consulting, to weigh the advantages and disadvantages of the alternative.
For better guidance and direction in the implementation of corporate restructuring, the expertise of business legal services should be included in the process. With the legal perspective from the experts, decisions on matters of capital reductions or increases will be studied carefully. Hence, there will a clear basis for making the decision. Also, the legal consultants can help in matters involving the simplification of company structures with the necessary rationalisation of the action.
Corporate restructuring can also be the result of a sale or acquisition transaction and the reorganisation can be done hand in hand with the legal experts with consideration on factors like the human resources, industry, and government regulations. In addition to these, legal advice about company liquidations or the establishment of branches will also be available for consideration as major decisions are made.
When corporate restructuring is inevitable, the first step to take is to seek the advice of the experts to make sure that it will be worth restructuring and proceeding with the company operations given the variations that need to be considered. When a trusted expert is by the company’s side, the right analysis tools will become handy and the best situational legal advice will be priceless.
The right implementation can save a company.
04 March 2012