2. Corporate Restructuring
Corporate restructuring may be defined as a
conscious effort to restructure policies, programmes,
products, processes and people to serve the redefined
policies, programmes on a sustainable basis, because
most of the restructuring policies are carried out
with an impulsive reaction to the market variables
or internal problems, without a serious attempt of
looking at long-term (or sustainable) results.
3. Corporate Restructuring
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. Such objectives include the following:
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; and
development of core competencies.
4. Corporate Restructuring
Scope for corporate restructuring
The Purpose (Quantitative &
Qualitative Results and their
sustainability
People related
restructuring
Process
restructuring
Product
restructuring
Restructuring of Value-
chains, Prices, Territories,
Value-drivers
Restructuring of
Assets facilities
Sills, Knowledge,
Wages, Relationships
& Roles
Restructuring of Core-
competencies
Restructuring of Ownership
Patterns, Entrepreneurial &
Knowledge Workforce
Restructuring of
Market-related
Variables &
Responses
7. Corporate Restructuring
• Reasons for Corporate Restructuring
• Corporate restructuring is implemented in the
following situations
• Change in the Strategy
• Lack of Profits
• Reverse Synergy
• Cash Flow Requirement
8. Corporate Restructuring
• Characteristics of Corporate Restructuring
• To improve the Balance Sheet of the company (by
disposing of the unprofitable division from its core
business)
• Staff reduction (by closing down or selling off the
unprofitable portion)
• Changes in corporate management
• Disposing of the underutilised assets, such as
brands/patent rights.
• Outsourcing its operations such as technical support
and payroll management to a more efficient 3rd party.
10. Corporate Restructuring
Salient Features of Companies Act, 2013 relating to
Corporate Restructuring (Section 230- 240)
National Company Law Tribunal to assume jurisdiction
of High Court.Section 230(2)
Application for compromise or arrangement to be
accompanied by an affidavit, disclosing all material facts
relating to the company.
Reduction of capital if any included in the compromise or
arrangement;
Any scheme of corporate debt restructuring consented to
by not less than 75% of the secured creditors in value
along with creditors responsibility statement, report of the
auditor as to the funds requirement after CDR and the
conformity to liquidity test etc.
