When you restructure, you review and update the way a company is operated, managed and even owned. Doing so has the potential to restore efficiency, profits and competitiveness.
A business may also restructure in order to grow or change direction. It can be a catalyst for positive change, especially when executed with a clear understanding of numbers and purpose.
The positive results of a restructure may be:
- Increased cash flow
- More manageable debts
- Better control of expenses
- Greater flexibility to operate in the current market
- A more competitive position in the market
- Increased profits
- A more compliant business
To start the process, your legal and financial team will do all or some of the following:
- Analyse current and recent performance (across sales, profits etc)
- Conduct forecasting and predict future outcomes
- Review a range of strategies and solutions
- Develop an action plan to move forward
This is why some clients reach out to us for help to restructure their business:
Change in market conditions
Market conditions are constantly evolving and companies must adapt to remain relevant. Changes in consumer spending or demand and the emergence of new competitors can significantly affect a business’s performance.
If a business is struggling to keep up with these changes, it might be time to restructure. For example, if a business is experiencing declining sales due to new technology being introduced to the market (think Blackberry vs iPhone), restructuring can help it realign its operations to meet these new demands.
Declining sales or financial difficulties
Financial difficulties can arise for many reasons, such as poor management, high debt levels or an unexpected downturn in sales. If a business is struggling financially, it may need to restructure to address these issues.
Restructuring can involve cost-cutting measures such as layoffs or reducing expenses, to improve the company’s financial position. In some cases, a company may need to restructure its debt or seek new financing options.
Expansion, diversification or strategy
As a business grows, it may need to restructure to support its expansion or diversification efforts. For example, if a business wants to start operating in new markets or launch new products, it may need to restructure its operations. This could involve hiring new staff, investing in new equipment or reorganising the company’s management structure.
A company might restructure in order to take on more debt and limit the personal liability of the director/owner. For example, it may make sense for a business that was originally operated as a partnership to move to be a more formal company, so the entity stands alone.
Changes in ownership or leadership
Changes in ownership or leadership can also be a catalyst for restructuring. If a business is sold or acquired, the new owners may want to restructure to align the business with their strategic goals. Similarly, if there is a change in leadership, the new management team may decide to restructure to improve the company’s performance.
Regulatory compliance is a critical aspect of doing business in Australia. Companies must comply with a range of regulations, including tax laws, employment laws, and industry-specific regulations. If a company is struggling to comply with these regulations, restructuring may be necessary to address these issues. For example, a company may need to restructure its payroll system to ensure compliance with employment laws or reorganise its operations to meet new industrial regulations.
If any of the above apply to your business and restructuring is an option, Reach out to Crest Lawyers today.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.