A business may face tough times during its life cycle and you may need to act quickly in making difficult decisions in order to survive. A practical way for businesses to adapt to a changing environment is through an effective restructure. Business restructuring is a flexible concept and there are many reasons for doing so.
About Goughs: We strive to be your trusted business adviser ensuring we are at the forefront ready to provide the right advice at the right time. Our team of corporate law solicitors can support your business with corporate restructuring services, preparing company constitutional documents, commercial contract law and so much more.
Topics to be answered in this article
1. Decide what you are trying to achieve with the restructure
A number of situations may prompt a business to consider a restructure. These include:
- Downsizing or expansion;
- Relocation;
- Management changes;
- Ownership changes;
- Raising funding;
- Planning business closure or exit from the market.
Organisational, asset or financial restructuring are effective ways to implement these changes which can increase the profitability and efficiency of a business. It is important to consider what the desired outcome would be and its implications before embarking on any restructuring.
2. Understand your finances and where you are right now
If your business’ finances are in difficulty, restructuring is an effective way to improve the position of the business.
The cash position of the business will affect the choice of route taken for the reorganisation. You may wish to consider the business overheads and decide what your essential and non-essential costs are. You should also look at what assets your business has. If your business is downsizing you might consider outsourcing, for example. You might also consider leasing a smaller premises. You could re-assess your staff organogram, with a view to making changes in the workforce. Of course, when considering any redundancy process there will be legal considerations which carry their own costs and complications.
When done strategically and legally, restructuring of a business can be an effective means of streamlining.
3. Seek the input of key staff and stakeholders
Communication is the key and it is important to have an effective consultation process with those impacted.
This could include group consultations and individual consultations with management and any shareholders. Should you be considering any redundancies then you must consult all other staff affected in a similar manner. If your business has union recognition, it is imperative that you engage with the union, especially if there are collective agreements in place. Also, the number of staff who may be affected by the restructure may trigger prescribed periods for consultation. You may find that input from those affected provides valuable opinion and information to consider.
4. Decide the new structure
With the above in mind, you should be able to decide exactly how your business should be restructured and how to go about this. In most cases, any changes to a business will require input from corporate, commercial and employment lawyers who will provide you with the means to achieve your desired outcome and considering the advantages and disadvantages of any new structure. You should also consult financial advisors if appropriate.
5. Communicate the plan internally and externally
Communication is the key to a smooth restructure. Engaging with staff openly and honestly will help avoid any potential problems that may arise further down the line. In a redundancy situation, there are a number of stages involved. These include selection, consultation and considering suitable alternative employment. It is best practice to consider these even in the case of a full business closure. For bigger scale redundancies, a failure to collectively consult can lead to penalties. This is a delicate and complex process which is why we highly recommend a business takes quality legal advice.
External communication is also important to consider, particularly when there will be a significant number of redundancies taking place. Failure to do so could result in bad press and a loss of business. Businesses who have openly explained the reasoning behind a restructure on a large scale often avoid heavy criticism by the general public.
6. Monitor and be prepared to adjust
Keeping an open line of communication with staff affected and monitoring the situation as it progresses will instil trust in your business and the process. You must prepare to be flexible and adjust where necessary, be alive to all outcomes and expect some negativity towards change. If all of the above steps are followed and the restructure process is managed with the correct consideration for all parties affected, it can provide future opportunities for both the business and its staff.
How can Goughs help?
We have a dedicated and experienced team of Corporate and Commercial lawyers who can provide specialist advice on the restructure of your business. They will work closely with our Employment team regarding any staff changes to consider.
