13 Jan 2021 Ankit Chadha

Management And Beyond: Corporate Restructuring Rule Book For 2020

Corporate Restructuring | TRC Corporate Consulting

The ongoing pandemic caused by the inconspicuous virus, COVID-19, is taking a toll on the health of all businesses around the world. The key terms associated with the majority of the company in one way or another, regardless of the industry in which they are associated, are economic downturn, poor financial results, liquidity crunch, fall in sales, weakened loan movement, disrupted outlook, capital stuck down.

With little chance of early recovery, parts of the economic sectors are adversely affected, while few sectors are still developing ways of striving in this unprecedented era. In the aftermath of the present crisis, states, economists, and policymakers across the globe are working day in and day out to achieve macroeconomic stability to the extent possible. In various countries, different fiscal stimulus packages are tailored for companies to withstand this economic frenzy.

The Present Landscape: Challenges Of Corporate Restructuring

Businesses are searching for every possible way to experience organizational transformation with too much fluster, fuzzy and complex scenarios across the globe to mitigate the business risk in the current period. Financially troubled companies are searching for a redesign of their activities, capital mix, and asset base to tackle interruptions and extreme market conditions to get their projects back on track.

Corporate restructuring is often typically a time-consuming and dynamic process with its uniqueness with each assignment under consideration. Still, the current situation raises more obstacles for result-oriented and effective corporate debt restructuring to be carried out. It is not only the contractual obligation of professionals associated with it to execute the task, no matter the chosen corporate restructuring types. But it needs more commitment on the part of management, company, and team to work together to create synergies from the corporate debt restructuring strategy.

Management Roleplay

Due to unforeseen circumstances, the business plan conceived by management for FY 2020-21 or master business strategies prepared by the Board of Directors for five years down the post-2020 line may not be feasible for execution in the current scenario. However, the management can use this downfall process to put the latest changes around the company into effect.

In order to align the corporate restructuring priorities, efficient and knowledgeable correspondence with the team and stakeholders is a crucial factor. When undertaking corporate restructuring or corporate debt restructuring, management must communicate actively with regulators, the judiciary, recipients, and creditors to keep them up-to-date with the various restructuring processes.

The management's responsibility is to ensure that various groups of stakeholders have access to relevant information when undergoing corporate restructuring. This calls for both creations of an auditable repository of knowledge and records of the objectives of Corporate Restructuring.

Being proactive helps management, through restructuring, to achieve long-term goals. In addition to this, the turnaround strategy's performance can also be justified by prompt decision-making and seizing the best business opportunity in the current situation.

Action By Organization

Vince Lombardi's very famous quote postulates, "Individual dedication to a group effort is what makes a team work, a company work, a society work, a civilization work." It is the team and talent collaborating in an enterprise that ultimately produces the fruits of any corporate restructuring. The current demanding climate urges extra vigilant and conscientious measures to be taken by the company's corporate restructuring workers during the formulation of the objectives of corporate restructuring plan. One such area that needs utmost attention to minimize risk and liabilities and handle the liquidity crisis is periodic training and the team's updated skill set.

While any corporation willing to undergo a company restructure, itself hires a team of external consultants, who are well-versed in corporate restructuring's legal and financial aspects. The collaboration, support, and vigilance of a corporate entity's team and staff help the company implement the best techniques of corporate restructuring.

Stay Compliance Friendly

Companies undergoing insolvency or liquidation proceedings are also subject to strict and time-bound compliance and regulations. The techniques of corporate restructuring are often very well controlled, depending on the restructuring's extent, by various regulators. While compliance and its adherence can turn out to be a complicated process in co-existing circumstances, ensuring statutory compliance can never be removed from the objectives of corporate restructuring.

Compliance fulfilment is the main way to trust regulators and judiciary. This is usually a field that, while it needs utmost significance, is still overlooked. Currently, deferred implementation or penalty compliance is not compliance.

In reality, making the proper use of technology in the process will make enforcement a simple part. Compliance calendars and deadlines should preferably be incorporated directly into the organization's framework. The committed team should be given the ability to fulfill every single requirement of compliance as and when possible. Corporates can incorporate a process that includes the robust audit and reporting tools that include complete audit trails for all user activities.

Transparency With Shareholders

As Corporate Debtor ('CD')/Resolution Professional ('RP') attempts to take up company restructure for uneconomic contracts and get financial respite, financial and operational creditors can request vast amounts of data to look at future earnings from potential corporate restructuring to meet their claims.

Furthermore, the objectives of corporate restructuring also need to address the critical issue of whether anything follows due legal process, especially where the legal process is different across countries. Transparency with various stakeholders, such as staff, financial and operational creditors, is key to this initiative in all knowledge distribution and decision-making.

When exchanging information with financial and operational creditors, workers, and potential investors, CD/RP should ensure that appropriate parties can access the information if and when they need it. A structured approach to data will provide a solid framework for decision-making for relevant stakeholders, simplifying the execution of a future corporate restructuring plan.

When decisions have been made, legal action may be taken, adopting a more methodological approach and allowing management to focus on stakeholder engagement, change management, employee productivity, and organizational issues.

How Every Corporate Restructuring Is Unique?

Corporate restructuring has gotten tremendous traction in the corporate world in the last one or two decades. An end-to-end corporate strategy, the objectives of corporate restructuring focuses on one or more facets of a business and are revamped to enhance commercial performance, handle competition efficiently, speed up growth, ensure optimal capital use, and meet the expectations of stakeholders. It serves various purposes for different organizations at different times and can take different forms. Corporate restructuring usually entails resolving problems or can be motivated by the need to make financial changes to the assets and liabilities.

Mergers, mergers, acquisitions, compromises, arrangements, or restoration are different types of corporate restructuring exercises. The objectives of corporate restructuring exercises may differ, but each of these exercises seeks to make the system more effective. Each organization has a unique role in capital, business structure, cash flow, lending arrangements, and revenue streams. Therefore, in the event of tension, organizations must control all of the above factors to maintain a degree of stability. Therefore, it is necessary to draw up a different execution plan for each and every business, as different techniques of corporate restructuring are needed for different businesses.

The Way Forward

At TRC Corporate Consulting, we provide market-leading corporate restructuring services focused on bolstering recoveries, enhancing financial performance, and undertaking the organization's underlying structural and financing problems.

Our corporate restructuring services help your organization formulate the objectives of corporate restricting, realize the right techniques of corporate restructuring, and help you implement the company restructure plans. If you want to upgrade your organization's performance, consult our company restructure specialists today. For any query about any of our services, contact our team!