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Makarand Lele - ICSI PPT 25.02.23.pptx
This document discusses corporate structuring and restructuring. It begins by explaining why structuring is important for predefined targets, protecting promoter interests, and benefiting society and GDP. It then defines structuring as the conceptualization of business in an ideal format, which is a basic step for entrepreneurs requiring a 360 degree futuristic approach. The document provides extensive guidance on factors to consider before structuring like scale, ownership, business form, funding needs, location, and resources. It also discusses registration processes and benefits for startups in India. The document then defines restructuring as reorganizing an existing structure to improve efficiency. It outlines major restructuring approaches and provides success stories of corporate restructurings in India. Finally, it discusses
Makarand Lele - ICSI PPT 25.02.23.pptx
- 1. CORPORATE STRUCTURING & RESTRUCTURIN G Speaker CS Makarand Lele PresidentICSI- 2018 Government Nominee ICMA Founder Partner Bizfirst Professionals
- 2. One day Programme onCorporate Restructuring & Valuation Organised By Pune Chapter of
- 3. Why structuring ? PredefinedTargets Promoter’s Interest Protection Benefits - Society & India’s GDP
- 4. What is structuring? • Conceptualization of business in workable idealistic format • Basic step for every entrepreneur • Needs 360 degree futuristic approach • Introductory brainstorming session
- 5. Think before youStructure • Scale of operations, Time Horizon • Ownership Structure – Self, Family & Friends, Outer Circle, Professionally Managed, Public • Business Forms – Non corporate, Corporate, Start-up, MSME, Manufacturing, Service, Export oriented, Charity, FPO • Funding Needs – Self funded, Seed Funding, VC, Capital extensive, borrowed capital, Strategic Investor • Business Location – Office, WFH, Industrial zone, FTZ, SEZ, Gift City • Resource needs & availability – raw materials, people, connectivity, technology, markets, trends
- 6. Think before youStructure • IPR – owned/ assigned, Security required • Taxation – Income Tax, GST, Stamp Duty • Government policies & Schemes • Cross border regulations • Contingencies • Organizational Legacy • Core values
- 7. Start-up- 3 StepsRegistration 92353 registered so far Recognition COI + Commencement + Write-up of business Highlights + Info/Document by DPIIT 80-IAC Fulfil Conditions + Form I + Documents 56(2)(viib) Recognized Startup + Paid up & share premium not to exceed 25 Cr + No investment in specified asset
- 8. Start-up – benefits Exemption under IT • Sec 56-Angel tax exemption- Startup recognized by DPIIT. Paid up capital & share premium not to exceed 25 Cr & no investment in specified securities or loans etc • Sec 80 IAC – for registered startup - CO & LLP ONLY-Avail tax holiday for 3 consecutive years in 10 years. Not available if the entity has opted for new tax regime. • Exemption to be claimed by filing form 80 IAC, Form 56 with Declaration • No Valuation required by MB under Income tax if exemption claimed however under other laws valuation would be mandatory Benefits under Companies Act – participatory notes – members deposit exemption Benefits under other Acts – TM – recovery of dues Central & State Government Schemes – Seed funding
- 9. Recognition as Startup- permissible • Merger or amalgamation u/s 233 & compliance with DPIIT i. 2 or more start-up companies; or ii. 1 or more start-up company with 1 or more small company • Conversion- Sub to condition 80-IAC (3) of IT Act. • Name change • CIN/LLPIN change- permissible for specified reasons only. • Common Directors • Indian promoters holding min 51%- as per CA, SEBI (ICDR) Regulations
- 10. Recognition as Startup- Not permissible • Sole proprietary • Entity incorporated outside India • Incorporating additional entities • Resultant entity formed due to merger demerger/ acquisition/ amalgamation/ absorption • Holding/Subsidiary/JV • Regulatory Areas: Entities in prohibited domains by law
- 11. Make in IndiaCompany • Income tax act – Sec 115BAB • Newly formed Manufacturing company including distribution & research activity • Not formed by demerger, split, transfer etc • Should commence production before 31 March 2024 • New machinery • Concessional income tax @15% plus surcharge • No AMT • No other rebate or deductions permitted • Life time concession
- 12. Women entrepreneurs entityin MH • MSME – formed & owned by women – not less than 80% ownership • Women employees – Not less than 50% on payroll • Lease premises - ok, separate power connection to establish proof of manufacturing • Incentive upto 35%-40% of capital investment spread over 7 years from start of production • By way of 100% refund of SGST & upto 5% refund of bank loan interest or electricity bill which ever is less • One time capital subsidy • Reimbursement of 50% of employers share in EPF contribution for 5 years • RPT sale without any value addition to be excluded
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- 14. What is Re-structuring? • Reorganization & rearrangement of existing structure by eliminating its negatives • To bring in efficiency, optimization, cost savings, flexibility, updation and so on …. • Forceful – due to policy changes etc
- 15. Major Driving Forces Cash Flow Management Improving Profitability Statutory Requirements Benefits of Synergies Simplified, Flexible, Suitable Structure Value Unlocking
- 16. Re-structuring Matrix • Business/ Asset acquisitions, takeovers, slump sale • Financial restructuring – Buyback, capital reduction, stake sale, division sale - demerger, debt restructuring • Forceful - Tag along, drag along, insolvency • Big fish eats small fish – forceful or voluntary, minority takeover • Alliances - Joint ventures, FPO, Projects • Stepping ahead – listing, acquisition of listed entity- reverse merger, location shifting, ODI, Conversion • Mergers, group consolidation, amalgamation
- 17. Mergers & Amalgamations •Forward Merger - Target company to merge in Acquirer with approval of NCLT u/s 230-232 Bank of Madura – ICICI Bank • Reverse Merger - Acquirer merging into Target company for availing benefits of taxation or other exclusive benefits including listing status Godrej, Jindal Group, Videocon • Fast Track Merger - Special scheme u/s 233 for selective categories without going to NCLT Onelife Capital, Quess Corp, FCS Software • Strategic Merger- HDFC- HDFC Bank, INOX- PVR
- 18. Acquisitions • Takeover –Acquisition of majority stake & management control in a running company. Poonawalla Group - Magma, Patanjali - Ruchi Soya, Elon Musk- Twitter • Management Buy-Out – Acquisition of promoters’ stake by executive management on its own or with financial partners MBO by Management of Sesa Seat, NDTV • Leveraged Buy-Out – Acquisition of company using debt funding which will be serviced through normal operations LBO of Tetley by Tata Tea
- 19. Divestitures • Demerger –A company is divided into two or more parts, or in which a resulting company is separated from a larger company i.e. demerged company with approval of NCLT. Larsen & Toubro, Reliance, Bajaj Group • Slump Sale – Transfer of an undertaking, for a lump sum consideration without assigning values to individual assets and liabilities. Approval from NCLT is not needed. Hindustan Unilever, GE Power, Rolta India • Divestment – Selling of stake in public sector undertakings by Government. Air India, Bharat Petroleum, LIC
- 20. Co-Existence • Joint Venture- Special purpose vehicle formed to undertake specific projects by 2 or more companies while retaining their original corporate identities Tata Motors – Fiat Chrysler, Tata Marcopolo, Tata Hitachi Construction Machinery • Strategic Alliance - Contractual arrangement for certain assignment viz. bidding for tenders, setting up infrastructure etc Tata Power & HPCL have joined hands to set up electric vehicle charging centres
- 21. India INC –Success stories • Turnaround case of Ruchi Soya by Patanjali – acquired in CIRP – 4500 crs – revived and now co is valued at 35000 crs with promoters stake of around 80%. Company is now renamed as Patanjali Food • Divestment of Air India by GOI – acquired by Tata group with selective liabilities of around 15300 crs and paid price of around 2700 crs. Acquired around 6000 landing & parking slots, prime flying time slots, trained employees. Tata becomes 2nd dominant player in Indian sky with 3 airlines. GOI also benefited by huge saving in daily cash losses of 20 cr and future liabilities. • Turnaround of Satyam by Tech M • Acquisition of Corus or JLR by Tata’s
- 22. Re-structuring Pivots • Strategy– define clearly for future – it involves market repositioning, focus on core competencies, divesting non core business or assets • Structural changes – reorganisation of group entities, revamp supply chain, changing reporting lines, creating new positions, changing guards • Cost reduction – to improve efficiently & profitability, renegotiate contracts, reduce headcounts, redesign facilities, identify new sources • Process change – automation, invest in technology, do research for new process, streamline operations • Culture change – foster collaborations, improve communication channels, create sense of accountability
- 23. Pro Tips • Manageresistance to change • HR management – continuation of service & benefits, new boss, new environment, cultural harmonization • Communication and implementation – regulatory compliances, License modifications, vendor & customer management, Banking issues • Change of control implications – restructuring fees & premiums, this amounts to transfer • Financial implications – cash flows, debt recovery, personal guarantees & securities, government subsidies & benefits, accounting policy changes • Taxation – capital gain, tax on distributions, personal income tax, POEM, conducive structure, GST on transactions • Duties – Stamp duty impact • Legal & litigations – continuity of agreements & contracts, ownership title changes, ongoing litigations, release of charge on assets
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- 25. Exit Strategy • Completesale • Stake Sale, JV • Parent change • Management change • Winding Up –Voluntary, Insolvency • Strike off • Restructuring outcome
- 26. Avenues in re/structuring Traditional ValueAdd Emerging
- 27. Company Secretary –Key Professional in Structuring & Restructuring • Advisory on business structuring, M&A, acquisition • Transaction Advisory • Valuation • Business analysis & identification of targets • Due Diligence • Financial modelling support • VC/ Funding support • Appearance before authorities • Support in listing, delisting, open offer, takeover • IBC support • Arbitration & Mediation • MIS setup up • Compliance management support • Advisory on cost optimization & cost systems
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