Legal Issues Around Restructuring Your Business

September 16, 2016 11:00 am

Broadly speaking restructuring refers to a business that is growing or downsizing, usually resulting in changing the ownership, share capital and directorship of the company. There are numerous legal implications to this which is why it is important to be aware of this before restructuring your company.

What to be aware of

A restructuring is not something that tends to happen too often – broadly speaking, a company will either increase a lot or downsize considerably once a decade.

As a business owner you need to decide when this is appropriate. However, while financial difficulties may make a restructuring necessary it may be better to do so earlier in order to minimise any damage that this can cause.

A big part of this is with redundancies and employment contracts – this is something that should be checked over. Aside from the legal implications of giving people sufficient notice there is also the PR aspect to think about and while it may be legal to suddenly empty an office and leave administrators to deal with it generally speaking you should find ways to communicate any issues with your workforce and look to resolve issues before it gets to that point.

It is also important to know that if you are restructuring due to financial difficulties doing so out of court may not always be the best option – for example. outside of court it can be harder to restructure public bonds.

Downsizing

Downsizing can involve a lot of difficult decisions such as who to lay off, how many and over what time period. In the event of a merger this can become even more complicated due to the fact any job losses would have to in effect be divided between the two companies’ respective workforces.

Valuation

Whether a company is growing or downsizing one potential issue can be how much the company is worth. This can lead to conflict so it is important that this is properly valued in order to minimise disputes as much as possible. This can also apply to employees – for example, some companies offer benefits such as offering employees additional stock in the company if the price increases.

There is also the difficulty when selling a company that there is certain information you may not be able to (or may not be willing to) disclose and this can affect the valuation.

Get the right people involved

This is why specialist legal representation is so important. Why it may be possible to get anyone to look over contracts there are specifics that need to be considered. In the case of a growing company this could mean getting the best possible value while in the case of a company that is being downsized minimising potential damage and resolving any disputes before they happen.

If you are concerned about how restructuring could affect your business then it is worth contacting our specialists. Talk to us today and we will be happy to discuss your plans in more detail to get the best deal for you, your shareholders and your employees.


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