Need and Scope of Corporate Restructuring

• Corporate restructuring involves organizing a company’s business operations to fulfill certain corporate goals. Restructuring in the business sector refers to the restructuring of all of the company’s major structures, such as legal, operational, and ownership. This is done to increase the company’s profitability and arrange it more effectively based on the company’s current demands.
• Objectives:
• The firm’s operations will be redirected in an orderly manner.
• Using spare funds from one firm to fund lucrative expansion in another.
• Exploiting the interdependence of current or potential enterprises within the company portfolio.
• Risk reduction.
• Development of key capabilities.
• Need and Scope.
• Corporate restructuring is the process of organizing all of the commercial operations of a corporation/enterprise in order to meet predefined corporate goals. Objectives include directing the firm’s actions in an orderly manner.
• Exploiting the interdependence of current or potential enterprises within the company portfolio.
• Redistribution of excess funds from one enterprise to fund lucrative expansion in another.
• Risk reduction
• Developing core capabilities Financial, technical, market, and organizational restructuring are all possible types of restructuring. The firms Act has a full code that specifies the legislation and method that firms must follow for compromises, agreements, and rebuilding. If a compromise or agreement is not bona fide but is designed to mask the acts of criminal directors, the Court will not approve the plan. According to the requirements of the Companies Act of 2013, the Court’s ruling becomes effective only if a certified copy is submitted with the Registrar of Companies in e-form 21. Compliance with accounting standards is a requirement under the Companies Act of 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.