There can be a number of reasons a business may choose to restructure. Including the plan to sell the business, merge, grow, develop into new markets, or prepare for a management buy-out. This could mean that part of the business needs to be transferred to within a separate limited company, a demerger is required or a share for share exchange.
Whatever the reason for the restructure, it can be a complex and time consuming process.
Here are our top tips:
1. Consult business plans
This will enable the business to plan for whether the restructure is appropriate and is being done at the right time in accordance with the plans for the future. If growth into new markets is planned for which requires a new corporate structure it is wise to do that as soon as possible.
2. Plan ahead
Even the simplest of restructures take time to plan, consult, and implement the necessary changes. It is far better to leave time to enable you to get appropriate advice and to carry out consultations with key stakeholders such as shareholders and any lenders.
3. Obtain tax and financial advice
Many aspects of a restructure will be driven by not only commercial reasons but tax reasons also. Tax clearance may be needed and this can take a while to obtain. It is imperative that you consult with your tax advisor in relation to a proposed restructure and obtain advice on the appropriate structure.
4.Obtain legal advice
Whilst this is always important, if the business is being prepared for sale it is vital. This is because as part of any sale the paperwork will be meticulously looked over by the buyer’s lawyers as part of the due diligence process. Anomalies in the documentation or process used can cause delays to a sale and sometimes additional expense.
5. Review trading agreements
These are often overlooked in restructures and after the restructure can often lead to contracts being in place with the incorrect parties. In some instances this may defeat one of the purposes of the restructure.
6. Consider employees
Where should the employees sit after the restructure? If they are to be moved the employees are likely to need to be consulted.
7. Consider shareholder protections
If the restructure is taking place for the purpose of a sale then this may be a good time to reconsider the shareholders agreement. Does the document reflect the current plans? In some instances if the majority shareholders cannot ensure that any minority shareholders will agree, it may be worth negotiating appropriate drag along provisions to avoid any delays and problems further down the line. Regardless of the purpose of the restructure if a shareholders agreement has not been reviewed for a number of years it is worth checking over it again.
The commercial law team at Stephensons are available to provide legal advice in relation to your restructure. Contact us on 01616966229.