Restructuring of a business can be necessary for a variety of reasons - some positive, and some negative. Re-structuring can take a number of forms - reducing the share capital of a particular company, or a demerger of businesses, or a re-arrangement of corporate holdings, for example. It could be carried out to effect a rescue of all or part of a business.
Re-structuring is essentially an internal re-organisation. It is vital to ensure that everything is done properly and that all records and company documents are in order. Our Corporate lawyers - often working with lawyers from our other teams such as our Commercial Property or our Employment lawyers - can assist you at both the discussion and planning stage, and also at implementation stage, to ensure that all aspects of the restructuring are carried out correctly. This will hopefully prevent the need for you to incur costs at a later and potentially more inconvenient time.
De-merger
It often makes good commercial and financial sense for mixed business activities carried on by one company or group to be separated out into several, separate companies or groups. This may be appropriate because divisions operating within the same company may have different strategies or priorities which mean that operating them under the same management and financial structure do not make sense. It might make commercial sense to separate out a division of a company so its assets and liabilities can be ring-fenced for onward sale to a third party.
Reducing Share Capital
As a result of the "distributable reserves” test, private companies have sometimes been unable to make distributions to their shareholders despite the fact that they have been trading profitably. Reducing a company's share capital can be used to free up surplus cash for shareholders or to enable the company to pay dividends in the future. Under the Companies Act 2006 it is now possible for private companies to reduce their share capital without a court order. The directors can make a statutory declaration that the company will be solvent for the following 12 months.
Rescue
A re-organisation through a de-merger or by a disposal of assets may be necessary to respond to a financial crisis such as insolvency or other lack of corporate financial liquidity, including forced repayment of debt. Subsequent re-financing of debt, disposal of assets, or re-organising the company's share capital can be used to deal with financial losses.
If the distressed company is part of a group it may be preferable to transfer assets to another company under the same ultimate ownership. There can be many different reasons for embarking upon this exercise either in order to repackage a division as a stand-alone entity to facilitate its disposal or to benefit from operational or tax efficiency gains.
We will listen to your concerns and advise you on the options available to you. We will then work closely with you and all other interested parties to bring the matter to a conclusion as quickly and cost effectively as possible.
We would be delighted to speak to you - please do not hesitate to call our large Corporate team so we can get to know you and your business. As we say, we are always there for businesses who are in our BLUE LAW scheme, so we invite you to join BLUE LAW now. Once you have joined, we try to answer any legal enquiries that you have, free of charge. If legal work is needed, we give you a price, and you are then free to "shop around". If you wish to speak to us now, please click on "Please Contact Me Now” or call us on 0800 084 3256. We look forward to always being there for you.