Thinking of Restructuring Your Business? What You Need to Consider

on Thursday, 26 March 2020.

While the next few months may be uncertain for UK business in light of coronavirus (Covid-19), the mantra of "business as usual" will continue to apply to (most) organisations, and this may include carrying out a restructure of it.

In the context of a company or business, a restructure usually involves making changes in respect of its ownership, structure or assets.

The reasons for carrying out a restructure often include:

a new management or ownership team taking over the business
needing to remove a historic part of the business or an inactive company from the group
needing to separate out the trading business and certain assets (usually property), in anticipation of a sale of one or the other

If you are looking at carrying out a restructure, then there are a few common things you should watch out for before getting started:

Bank Consents
Does your business have any existing banking facilities, such as would require a formal consent before completing the restructure? If so, you should think about getting in touch with your relationship manager sooner rather than later, to discuss and get your plans approved.
Shareholders and Company Documents
If the restructure involves transferring shares in companies, particularly those with large numbers of shareholders, you may need to involve the shareholders in the process and obtain their consent, for example under a shareholders' agreement.
Tax and Accounting Advice
Transferring assets between companies will usually have tax and accounting implications. For example, there can be issues where assets are transferred at less than their market value.

You should liaise with your accountant and tax advisors at the earliest opportunity to determine how best to effect the restructure.
Employees
If you have employees, and part of the business is transferring , you should check whether TUPE (transfer of undertakings) will apply to the employees and seek out specialist advice where necessary, to ensure that the business complies with its legal obligations.