Running a business can be tough and unpredictable, even if you have years of experience. In certain cases, you may want to consider restructuring your company. With a new structure your business may stand a chance for recapitalization or taking advantage of a potential opportunity. This is a list of different types of corporate restructurings. When the time comes, you should consult a corporate lawyer to determine if and what type of corporate restructuring is best for your company.
- Mergers / Amalgamation
- Acquisition and Takeover
- Demerger (spin off / split up / split off)
- Reduction of Capital
- Joint Ventures
- Buy back of Securities
What is meant by corporate restructuring?
Corporate restructuring refers to when the organization of a business is in the process of changing. The need to undergo a corporate restructuring can occur for a number of reasons such as to save the business, reduce costs, reposition the company, or to focus on certain products.
These changes can be small or big and can involve making dramatic changes to a business by cutting some departments out or merging them together, which often has the effect of displacing staff members. Careful consideration must go into the decision and process as it may not only affect staff members, but investors, vendors, clients, and consumers, as well.
Certain corporate restructurings in Canada are governed by the Companies’ Creditors Arrangement Act or the proposal provisions of the Bankruptcy & Insolvency Act (BIA). Traditional matters arising in Companies Creditor Arrangement Act or Bankruptcy and Insolvency Act proceedings:
-initial filing applications
-bringing or defending lift stay motions
-litigation of debtor-in-possession loans and collateral rights
-disputes relating to sales
-confirmation of plans or proposals, negotiating and implementing plans or proposals
If your company requires this type of restructuring you should consult an insolvency lawyer about possible steps you need to take.
When a business is growing or it has other needs, a change in ownership may be required. Ownership restructuring sometimes also happens because of different tax plans. Our corporate lawyers in Toronto, Hamilton and Oakville, can give you advice regarding various restructuring situations.
If you decide to completely change the ownership of your business or your directors, you may need to close the existing business number and accounts registered with the Canada Revenue Agency. So, you will need to register a new business number and new accounts if you have a sole proprietorship. In cases when ownership restructuring is a result of selling a business, the old owner needs to close the business number and the new owner will need to register a new number.
If there is a change of business partners, the steps you take will depend on the partnership agreement. What steps you need to take in this case of ownership restructuring, also depends on whether the business is registered with the operating name of that partnership or with the legal name of every partner.
When it comes to ownership restructuring in corporations, the process is similar but may require approvals from the shareholders and the board of directors. With regard to the corporate filings, the main difference is that a corporation may need to provide the name of a director and his/her social insurance number.
To change your business number, you need to fill in the filing Form RC145, Request to Close Business Number (BN) Program Accounts.
Company restructuring costs
Costs can add up quickly for things such as reducing or eliminating product or service lines, canceling contracts, eliminating divisions, writing off assets, closing facilities and relocating employees.
If you need to close facilities and relocate employees, eliminate product lines or write off assets, you should expect some costs. Situations that require terminating personnel should be carefully considered in advance and in consultation with legal counsel. Usually, there are considerable costs when you need to add new services and train new employees. Business expansions often go hand in hand with new expenses that may require project financing.
How long does a company restructure take?
It is hard to say how long company restructuring can take because it depends on the company and every case is different. Generally speaking, it can take at least five months to restructure a business or even a year. You should first start with detailed research and then make your decisions in order to come up with a well-organized plan. The process of implementation that a new company restructuring requires also depends on the company and the employees.
Finally, you should review the whole restructuring process and draw informed conclusions about the positive and negative outcomes. After restructuring your company, you should have in mind that a lot of critical challenges may come up. But if you have no other options, conventional business wisdom would suggest that you should not hesitate. A restructuring may require you to learn how to take risks and rebuild your company. A corporate lawyer can help you with company restructuring and make sure your business gets its best chance for success.
What is capital restructuring?
Capital restructuring implies that the capital of one company will be changed which generally involves a change in the composition of ownership and flows of capital. Business conditions may change for better or worse can be a precursor for changes to capital structure. For example, if your company needs more funding to grow, or if the company’s revenue is lower than usual. By adjusting the capital and reorganizing capital flow, your business can get back on track.