Corporate restructuring is when a company changes its structure, such as financial and operational, to boost their profits and efficiency. This is a common strategy during financial setbacks and crisis situations when changes can rescue a business.
Although this time can be turbulent, companies can use the overhaul in a positive way to improve their operations and give them a competitive edge.
If you’re dealing with a company restructuring process, read the rest of this article to explore the following:
- Common types of corporate restructuring
- How corporate restructuring occurs
- What to do during a company restructuring
- Legal implications of corporate restructuring
- Why you should consult with a lawyer for assistance
What are Common Types of Corporate Restructuring?
There are various types of corporate restructuring. Some of the most common include the following:
- Legal restructuring. This includes making legal changes to all departments and operations to boost or ensure compliance.
- Turnaround restructuring. Replacing aspects such as business models and product lines that haven’t been successful for the company.
- Operational restructuring. Finding new ways to drive growth or collaborating with other companies.
- Cost restructuring. A company might make changes to save money, which is common during financial crises.
- Mergers and acquisitions (M&A). This is when a company will join forces with another company to increase its growth.
How Does Corporate Restructuring Work?
A corporate restructuring usually includes the following:
- Internal adjustments. This can involve changing how departments work or making adjustments to different processes so that they run smoother.
- Negotiations. It’s common for companies to hire experts, such as legal advisors, so that they can assist parties during the negotiation phase.
- Asset sales. This element of the process involves selling some parts of the business to investors, if required.
- Changes to leadership. It’s common to hire a new CEO who can make the outlined changes.
- Put changes into action. Once a new CEO is positioned in the company, the team can put the changes into practice, such as by following new systems and procedures.
- Downsizing. It’s common for company restructuring to involve layoffs.
What Should You Do During a Company Restructuring?
If you’re dealing with a company restructuring, there are ways to ensure the process is smooth and successful. Here are some important things you should do.
Be Transparent
You want to offer information to all team members. Specify the process of restructuring the company so that everyone understands what it entails and what is required of them during this time.
Have Discussions
Linked to transparency, you want to have open communication with your team and employees so that you can address any issues or concerns that arise during the restructuring process.
Follow Employee Work Performance
It’s essential to keep an eye on employee work during and after the corporate restructuring process so that you can see how everyone is taking on the adjustments. You can also assist them to get used to the changes over time and ensure that everyone is on the same page.
What are the Legal Implications of Corporate Restructuring?
During the corporate restructuring process, you should consider the legal aspects of it so that you avoid any issues, mishaps, or complications.
Legal Compliance
You should follow all important regulations in the industry, and report obligations to your government agencies so that you don’t slip up and have to pay fees or penalties.
It’s good practice to consult with a lawyer from ContractsCounsel, an online legal network connecting vetted lawyers with clients. They have an in-depth understanding of all corporate restructuring laws and regulations in your location so that you stay compliant.
Tax Consequences
There can be tax rules and consequences to consider in a company restructuring, such as if you’re involved in cross-border situations. You should consult with a tax lawyer who can help you identify tax relief opportunities and check all tax regulations.
Employment Law for Layoffs
It’s common for layoffs to occur, so company owners need to ensure they follow all employment regulations and fulfill severance duties.
Due Diligence
To avoid issues during corporate restructuring, you should be careful by reviewing all contracts. It’s also essential to have transparency in your financial statements and check that you’re operating in line with industry requirements.
Reduce the Risk of Disputes
It’s common for partners or shareholders to argue over the changes to be implemented in the company. To prevent being embroiled in a lengthy dispute that can delay operations, you should review your business contracts and keep open communication with all members so they know what to expect and are informed about all the steps in the restructuring process.
Why Should You Involve Legal Professionals Early?
It’s crucial to seek legal guidance at the start of a corporate restructuring, as this will help you reduce your legal and financial risks. Here is how an experienced lawyer from ContractsCounsel will help you.
- They’ll address any risks or legal issues before they arise, saving you problems and penalties.
- They’ll check for any compliance issues to ensure everything is legal.
- They’ll review your contracts and agreements to spot control provisions and termination clauses.
- They’ll guard against intellectual property (IP) risks. They will safeguard trade secrets and other sensitive business information.
- They’ll ensure operations are smooth so that changes don’t have to be disruptive to your business.
- They’ll minimize your risks, such as litigation or damage to your business reputation.
If you need to have your business documents and contracts reviewed, you can post a project on ContractsCounsel for free. Once you do, you’ll receive multiple lawyer bids. You can review the lawyers’ profiles for information about their years of experience, expertise, and credentials, so you can hire the best one depending on your situation.
Do you need a lawyer for corporate restructuring?
If you’re seeking legal guidance during your corporate restructuring, you should consult a lawyer on ContractsCounsel. All lawyers are vetted, with years of experience in skillfully helping companies adopt effective changes during a restructuring. They’ll balance all parties’ needs and reduce your legal and financial risks.