Corporate Restructuring

Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. Alternate reasons for restructuring include a change of ownership or ownership structure, demerger, or a response to a crisis or major change in the business such as bankruptcy, repositioning, or buyout. Restructuring may also be described as corporate restructuring, debt restructuring and financial restructuring. Corporate restructuring is the process of redesigning one or more aspects of a company. The process of reorganizing a company may be implemented due to a number of different factors, such as positioning the company to be more competitive, survive a currently adverse economic climate, or poise the corporation to move in an entirely new direction Methods of restructuring are explained below.

 

  1.  Asset Based Restructuring (Mergers and Acquisitions): Acquisition of companies/business units or merger with other companies has been one of the most common ways of carrying out restructuring. Since the motives of merger or acquisition are the same and both involve transfer of ownership and control of assets and the right to manage corporate cash flows and the difference between the two is very often only a matter of technical detail, the term mergers and acquisitions is often used interchangeably.
  2.  Amalgamations: The term amalgamation is used where two or more companies are involved or where one is merged with another or taken over by another. Amalgamation is blending of two or more existing undertakings into one undertaking, the share holders of each blending company becoming substantially the shareholders in the company which is to carry blended undertakings. There may be amalgamation either by the transfer of two or more undertakings to an existing company. The term amalgamation contemplates not only state of things in which two companies are so joined as to form a new company but also the absorption and blending of one by the other.

Restructuring a corporate entity is often a necessity when the company has grown to the point that the original structure can no longer efficiently manage the output and general interests of the company. The restructuring is seen as a positive sign of growth of the company and is often welcome by those who wish to see the corporation gain a larger. For more information on corporate restructuring, you can always contact the consultants at Emirates Chartered Accountants Group Dubai. Email info@emiratesca.com

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