Need and Scope of Corporate Restructuring

Corporate Restructuring is concerned with arranging the business activities of the corporate as a whole so as to achieve certain predetermined objectives at corporate level. Restructuring in the corporate world means, reorganization of all the important structures of the company like legal, operational, ownership etc. This is done, to enhance the profits of the company and to organize it in a better way according to the present needs of the company.

Objectives:

• Orderly redirection of the firm’s activities.
• Deploying surplus cash from one business to finance profitable growth in another.
• Exploiting inter-dependence among present or prospective businesses within the corporate portfolio.
• Risk reduction.
• Development of core competencies.

Need and Scope

Corporate Restructuring is concerned with arranging all the business activities of the corporate/enterprises as a whole so as to achieve predetermined objectives at the corporate level. Such objectives include the following:

• Orderly redirection of the firm’s activities.
• Exploiting inter-dependence among present or prospective businesses within the corporate portfolio.
• Redistribution of surplus cash from one business to finance profitable growth in another.
• Risk reduction
• Development of core competencies restructuring may be financial restructuring, technological restructuring, market restructuring, and organizational restructuring. Companies Act containing a complete code in itself which provides for law and procedure to be complied with by the companies for compromises, arrangements, and reconstruction. If a compromise or arrangement is not bona fide but is intended to cover misdeeds of delinquent directors, the Court shall not sanction the scheme. In accordance with provisions of the Companies Act, 2013 the order of the Court becomes effective only after a certified copy thereof is filed with the Registrar of Companies in e-form21. Compliance with accounting standards is a mandatory requirement under the Companies Act, 2013.

Scope

Internal Streaming and Reorganizing the Business Process:

• Closing uneconomical units
• Inducing programs to reduce costs.
• Reducing the head count.
• Disposing off the assets which are not being used.
• Reorganizing the business process.

Financial Engineering:

• Issuing different types of shares like non-voting or preference shares.
• Issuing different types of debts to meet the needs of fixed and working capital.
• Buying back of shares.
• Infusing foreign debts and equities.

Portfolio and Asset Restructuring:

• Purchasing assets of another firm.
• Merging two or more companies or entities.
• Acquisition of a part of an entity which leads to the change in ownership.