Corporate Reorganisation: An Overview

A business may require reorganisation or restructuring for many reasons. Companies may choose (or be forced) to restructure in response to a range of conditions including economic trends, falling profits, and change of ownership. 

While the term corporate reorganisation can refer to any type of company change, reorganisation often occurs in response to poor financial performance. Reorganisation, in this sense, provides the opportunity to reduce inefficient business practises, stabilise financial performance, and maximize future growth opportunities. On the other end of the spectrum, reorganisation can also be required in situations whereby a successful company has decided to end operations and requires assistance distributing assets. 

Restructuring or reorganisation is a term used in corporate management and generally indicates a situation whereby a company:

● Changes its core organisational structure. This tends to involve the redistribution of resources, creation and dismantling of business units, and shifting of reporting structures.

● Alters its financial structure. This can involve refinancing debt, merging with another company, or selling assets.

Reorganisation is not an easy process and works best if led by a legal and financial expert.

The first tip for a successful reorganisation? Get expert assistance.

While you might understand your company inside and out, that doesn’t mean that you are best placed to lead a reorganisation. There many external factors that you are unlikely to have considered and in most cases, reorganisation requires a strong legal background.

Additional suggestions include:

Before undertaking a corporate reorganisation, you need to take the time to develop and articulate your end goal. The first step in this process is understanding why your business requires reorganisation in the first place.

Do you need to streamline operations as a result of poor financial performance? Does your business structure lack agility? Or, are you looking to downsize a successful operation while maintaining performance levels?

Regardless of your situation, understanding your ideal destination will help you identify the decisions that need to be made.

Depending on the company size and circumstances, reorganisation can be a lengthy process. Unfortunately, time is often a luxury, particularly in situations whereby companies are reorganising as a result of financial difficulty. 

Keeping your timeline in mind can help you prioritise the decision making process. You should always keep in mind the responsibility that you have to others — including employees and creditors — and prioritise decisions that affect these parties. 

Reorganisation of solvent operations may not carry the same sense of urgency, but this situation does require you to keep in mind long-term timelines. Reorganisation can be accompanied by a change in profits or services offered; understand that it may take time to re-establish yourself under a new structure. 

Finally, communication is key to a successful corporate reorganisation. It is vital that all stakeholders — including creditors, employees, and management staff — are kept up to date and understand what impact the reorganisation will have on them.

Employees in particular may take time to adjust to a restructuring. Be sure to engage them in the process and be open to discussing feedback or concerns that they may have.

Successful corporate reorganisation requires a broad skill set and benefits from experience. If your business requires reorganisation, for whatever reason, consider reaching out to a financial expert today.