Introduction Meaning of corporate restructuring, need, scope and modes of restructuring, historical background, global scenario, national scenario. Strategies Planning, formulation and execution of various corporate restructuring strategies - mergers, acquisitions, takeovers, disinvestments and strategic alliances, demergers and hiving off. Mergers and Amalgamations Meaning and concept; legal, procedural, economic, accounting, taxation and financial aspects of mergers and amalgamations including stamp duty and allied matters; interest of small investors; merger aspects under competition law; jurisdiction of courts; filing of various forms; Amalgamation of banking companies and procedure related to Government companies; Cross border mergers. Takeovers Meaning and concept; types of takeovers; legal aspects - SEBI takeover regulations; procedural, economic, financial, accounting and taxation aspects; stamp duty and allied matters; payment of consideration; bail out takeovers and takeover of sick units; takeover defences; cross border takeovers. Valuation of Shares and Business Introduction; need and purpose; factors influencing valuation; methods of valuation of shares; corporate and business valuation.
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Similarly business failure is associated with forms that cannot earn adequate returns on their investments. What is important is whether a business failure is permanent or temporary. In fact the appropriate course of action depends on whether the business failure is permanent or temporary. A firm that consistently reports losses at operational level would experience decline in market share and eventual closure. Thus when a firm faces technical insolvency its assets are still greater than the liabilities but the firm is confronted with liquidity crisis.
If this is not done at right time, the firm may have to face a more serious type of failure — Bankruptcy. Although bankruptcy is a more obvious form of business failure courts treat technical insolvency and bankruptcy in the same way. The decision to continue operating has to be based upon — The feasibility and fairness of reorganizing the firms as opposed to the benefits of liquidating the business.
If on the other hand the difficulties are believed to be insurmountable, then liquidation will take place either by assignments of assets to an independent party for liquidation or by formal bankruptcy proceedings. Such a firm has two remedies, Attempt to resolve its difficulties with its creditors on voluntary or informal process. Petition the courts for assistance and formally declare bankruptcy. The company creditors also may petition to courts and get the company involuntarily declared bankrupt.
Before this decision can be made both the business liquidation value and its going concern value has to determine. Liquidation value: equals the proceeds that would be received from the sale of the business less its liabilities. Normally, If the going-concern value exceeds the liquidation value the company needs to be reorganized otherwise it should be liquidated. Management understandably is not in a position to be completely —objective, about the above values.
In some occasions this can keep the company busy for several weeks of needed time before creditors take action. If the difficulties are more than just minor and temporary the company may turn to its bankers with request for additional working capital loans. Restructuring of debt by bankers can be quite complex. In Extension:— The failing company tries to reach an agreement with its creditors that will permit it to lengthen the time for meeting its obligations.
Generally if this is so a suitable plan of reorganization can be formulated and the firm is reorganized otherwise it is liquidated. As a part of this process a firm is either reorganized or dissolved. Corporate restructuring can occur in myriad ways. Mergers, takeovers, divestitures, spin-offs, and so on referred to collectively as corporate restructuring have become a major force in the financial and economic environment all over the world. He tried to look at issues like why corporate restructuring occurs periodically, what conditions or circumstances induce corporate restructuring and how should corporate governance be reformed to make it more responsive to the needs of restructuring.
The key insights of this study are as below, Even though the environmental change which warrants corporate restructuring is a gradual process, corporate restructuring is often an episodic and convulsive exercise. Typically an organization can tolerate only one vision of future, articulated by its chief executive and it takes time to communicate that vision and mobilize collective commitment.
Once the strategy and structure that reflect that vision are in place, they acquire a life of their own. A constituency develops with a vested interest in that strategy and structure which resists change unless it becomes inescapable.
The conditions or circumstances which seem to enhance the probability of voluntary corporate restructuring but not necessarily guarantee same are, persuasive evidence that the strategy and structure in place have substantially eroded the benefits accruing to one or more principal corporate constituencies a shift in the balance of power in favor of the disadvantaged constituency availability of options to improve performance Presence of leadership which is capable of and willing to act.
Corporate restructuring occurs periodically due to an on going tension between the organizational need for stability and continuity on one hand and economic compulsion to adapt to changes on the other. For example, Hindustan lever Ltd.
In response they are forced to change their strategic framework. Uncertainty has become the central element of competitiveness and business environment. In a world defined by turbulence surprise and a lack of continuity predictions are increasingly erroneous and therefore dangerous. They are equipping themselves to be able to seize unexpected opportunities and retreat rapidly from bad risks. For three decades after world war two most economies around the world witnessed historically unparalleled progress.
There were a variety of causes of this change in the trajectory of growth some of a macro economic nature and others rooted in the structure of corporate organization and in inter-firm linkages. The response to these pressures has been a significant change in macroeconomic policies amongst countries.
Throughout the world there has been a surge toward deregulation and a feeling of barriers to the global flow of many resources. For some countries this has resulted in significant enhancement to economic growth but for others globalization has done little to enhance living standards and security.
Thus the gains from globalization is not automatic they depend on response of producers to the changing competitive environment. One critical area of change is to be found in organization of production. To cope with new competitive pressures firms have to deliver not just low-priced goods and services but also products of greater quality and diversity.
This requires in the first instance that they reorient their internal organization, changing production layout, introducing new methods of quality assurance and instituting processes to ensure continuous improvement.
But these changes in themselves are not sufficient. They need to be complemented by alterations in the relationship amongst firms particularly with firms. Author can be reached at sunraj.
CORPORATE RESTRUCTURING ICSI PDF
Economic and Competition Law Aspects of Mergers and …. Corporate Restructuring, Valuation and Insolvency. Information Technology and System Audit. Valuation Introduction and Techniques.
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