Restructuring is the corporate management term often used for the act of rearranging the legal, ownership, operational, or other structures of an organization for the rationale of making it more beneficial, or efficient. Corporate restructuring permits companies to deal with less efficient units, adopt new strategic opportunities, and achieve credibility in the capital market.
Corporate restructuring has increasingly become an indispensable part of any business and a common occurrence around the world. Many companies across the world have restructured their divisions, restructured their assets, and modernized their operations in a bid to stimulate the company's performance. It has enabled numerous organizations to react rapidly and more effectively to new opportunities and unexpected pressures.
The following are the corporate restructuring tools commonly adopted by corporates in India:
- Merger: A business strategy where two or more business entities are merged into one either by way of absorption or amalgamation or by forming a new company. The merger of two or more business entities is commonly done by the exchange of securities between the buying and the selling company.
- Demerger: A business strategy in which a single business is fragmented into components, either to operate on its own, to be sold, or to be dissolved. A de-merger permits a large company, such as a conglomerate, to split off its various brands to invite or prevent an acquisition, to raise capital by selling off components that are no longer part of the business's core product line, or to create separate legal entities to handle different existing operations
- Disinvestment: When a large corporate entity sells out or liquidates an asset or subsidiary, it is known as disinvestment.
- Joint Venture: Under this strategy, an organization is formed by two or more companies to undertake financial acts together. The organization created is called the Joint Venture wherein the two entities partner on every expenditure, profit & leadership of the organization.
- Slump sale: Under this strategy, an entity sells one or more undertakings for lump sum consideration irrespective of the individual values of the assets or liabilities of the undertaking.
How ASC Help
We are a team of professionals, well versed with the tax and regulatory environment in India, and stays constantly abreast with the changes in tax policies, administration, and regulations. We assist our clients both corporates and non-corporates not only in developing effective tax strategies but also in implementing them efficiently.
- Understand the client’s business needs and suitably advise on the restructuring approach;
- Identify alternate corporate restructuring options that may be available;
- Critically evaluate the corporate restructuring options available from the stakeholders’ perspective;
- Identify potential tax costs associated with the various options and suggest suitable options for cash and tax optimization;
- Drafting/reviewing of schemes, buyback offers board resolutions, shareholders’ approval, etc.
- Making applications for obtaining necessary regulatory approvals such as from Regional Directors, Registrar of Companies, Reserve Bank of India, NCLT, etc.