Business Restructuring During Coronavirus COVID19
Business restructuring during the Coronavirus COVID19 pandemic involves restructuring the assets and liabilities of a company. The procedure involves suspending or terminating a business, closing shops or factories, and creating general team-member cuts. Decisions either for performance, cost or location. The procedure involves a charge against earnings for that trading period. Compare debt restructuring.
Considering the restructuring of a company, apart from the above, the company may wish to achieve more efficient and adapt to ever-changing markets, new markets and times with the Coronavirus COVID 19 pandemic.
Significant corporate restructuring activities include:
What is Restructuring?
Companies restructuring ready to sell, merger, change the direction of the business or be incorporated into the existing group. Therefore, it may restructure after the failure of a new product, consuming cash and building debt, and reducing operating costs accordingly.
However, subject to the approval of shareholders and possibly creditors, the board may however decide to then sell company assets, raise cash, reduce debt, and consider a pre-pack administration.
Business Restructuring during Coronavirus Covid19 – The Process?
When a company is restructured internally, operations, processes, departments or ownership can however change, which then makes it more integrated and profitable.
Advisors usually join in the short term to implement restructuring plans. However, the divisions can be sold to other investors, and a new management team is set up from the top.
Results include alterations in new efficient procedures. The company invests in updated computer systems and the latest software, faster, bigger networks, possible relocation, or company sites’ closure.
During restructuring, legal teams remain close to then assist with issues.
Restructuring therefore then enters an unsettled period for the company, often an awkward time as the company’s dynamics change. Change may result in loss of workforce, though upon completion, the company will operate far better. Once employees adapt, the restructured company should perform better through less debt, further improving performance, especially efficiency in production methods.
HMRC Support During the present pandemic.
Within the United Kingdom, HMRC are offering support to help companies through this unprecedented time.
However, if your limited company is struggling during the pandemic, please read’my business can’t survive the pandemic‘.
Please read further on our web page ‘HMRC support for contractors during pandemic
Rationalising and cutting costs?
Many aspects form the restructuring of a business. The most common types of restructuring are rationalising and simplifying a business operation by flagging up non-performing departments that can either face closure or a reduction in size and cost while redirecting the saved resource and money, therefore into sectors more profitable in the business. A slimmer, more refined organisational structure enables increased efficiency and a potentially significant reduction in operating costs.
Once restructured, a company should have increased strength, setting it up well for the future. Analysing possible risks, which may well be different from those risks identified when the directors first launched the business, ensures it is fit for a purpose while also improving stability and preserving stakeholder value.
Business post Coronavirus Covid-19 pandemic?
UK’s businesses need to adapt to the new regime, which possibly requires social distancing measures and increased hygiene and health protocols. In addition to changing consumer behaviour or feelings, some companies will find the first months of trading, especially testing. Consequently, companies may not react immediately, but operating costs will increase.
Those companies using the government’s subsidised furlough scheme to cover wages will be hit with the whole wage bill for their employees once more. However, cash flow has taken a hit due to months of no trade, which could be financially straining.
Companies should consider the potential to apply for an emergency loan taken out during this time, along with tax or rent previously deferred, and increases outgoings, thereby affecting cash flow.
For further detailed help, please view ‘Business Restructuring and HBG Advisory‘.