Managing Attorney
Are you considering restructuring and reorganizing your business? Are you sure that you are operating out of the most efficient corporate structure? Corporate restructuring and reorganization have many advantages. However, there are some things you need to know about business restructuring and reorganization before you begin the process. Our Texas corporate attorney discusses what you need to know to help you avoid problems and mistakes that could hurt your business.
The Basics of Business Restructuring and Reorganization
Business restructuring involves reorganizing a company’s operations, finances, and management. Reorganizing these elements can improve efficiency, quality, and productivity as well as segregate liability amongst various business lines. It can also reduce overhead and costs, improving the company’s profit margin.
The Necessity of Restructuring and Reorganization in a Business
A Texas business may need to restructure and reorganize for several reasons. Common reasons for business restructuring and reorganization include, but are not limited to:
- Close unprofitable or underperforming units
- Improve customer service and satisfaction
- Avoid filing a corporate bankruptcy
- Reorganize the company’s management to improve the company’s performance
- Avoid closure or bankruptcy through mergers, acquisitions, and amalgamations
- Participate in a joint venture or strategic partnership with another company
It is better to discuss your options with an attorney before matters become desperate. Your corporate restructuring options may decrease if the company is on the brink of failure.
Voluntary Restructuring
A Texas business may also voluntarily restructure. Common reasons for voluntary restructuring include:
- Increase tax efficiency
- Risk mitigation; Segregate liability
- Separate lines of business in order to include potential investors in certain, but not all, lines
- Plan to sell a line of business, while retaining others
Steps Involved in the Business Restructuring and Reorganization Process
The steps involved in business restructuring and reorganization need to be tailored to fit the business. Corporate lawyers assist in developing a strategy that will work for the company.
However, some elements of restructuring and reorganization are common, such as:
- Determine the goals and what the company wishes to achieve by restructuring and reorganizing.
- Consider the impacts of restructuring and reorganizing on all aspects and visions of the company.
- Identify the current weaknesses, strengths, opportunities, and threats by performing a SWOT analysis.
- Design an organizational structure that meets your business and tax strategy.
- Communicate and implement the change in structure and organization.
- Analyze the success of restructuring to make changes to optimize the benefits of restructuring and reorganizing your business.
Business restructuring and reorganization are not always about correcting problems. Businesses may need to restructure and reorganize as they grow and expand.
Legal Considerations During Business Restructuring and Reorganization
When a business restructures and reorganizes, several legal matters must be considered. For example, do the changes comply with employment laws? How best to restructure while not producing a large tax bill? Will the changes in the business impact statutory and regulatory compliance, contractual obligations, or debt/creditor agreements? If you do not employ general counsel, hiring a Texas corporate attorney to review the legal matters is crucial to avoid problems. We will lead you through the process all the way to completion.
Common Challenges and How to Overcome Them in Business Restructuring
Employees are often the ones that feel the effects of business restructuring and reorganization. Some employees may resist the changes, especially if the changes increase their fear of losing their jobs or significantly change their job descriptions. Clear communication, involving employees in decision-making, and effective management can help overcome problems with employees.
Restructuring often results in redundancies, which may require layoffs and changes in individual roles. Even though decisions are made at the very top, it can help to include key leaders in the planning process to promote transparency and avoid losing valuable employees.
Other challenges can be overcome by engaging advisors early in the restructuring process. Advisors include corporate lawyers, business consultants, and debt advisors. Select advisors with industry experience in addition to experience restructuring companies.
The Role of Corporate Attorneys in Business Restructuring and Reorganization
Texas corporate attorneys play a significant role in business restructuring and reorganization. They ensure compliance with federal, state, and local laws. The attorneys prepare and review all documents necessary for reorganizing and structuring the company. If the restructuring involves mergers or acquisitions, a corporate lawyer negotiates the terms of the agreement.
Corporate lawyers offer practical and strategic advice during all phases of the restructure. Contact our Texas corporate attorney if you have questions about business restructuring and reorganization. During your consultation, we dive deeper into the specifics of restructuring and reorganizing your business, including how we can help.
This is not intended to be legal advice. Please consult an attorney.