Corporate or business restructuring is one of the most effective ways to ride through a financial crisis and improve performance. Check out this post to know 5 of the top advantages of business restructuring in India.
Running a business is no doubt very challenging. It is not uncommon for companies to struggle with a financial crisis or other operational inefficiencies. One of the most effective ways for businesses to navigate such challenges is by implementing corporate restructuring.
During the restructuring process, the capital structure or operations are significantly modified to eliminate the financial crisis and improve performance. Operations reduction, debt financing, and selling company portions to interested investors are some common restructuring strategies.
Here are 5 of the top benefits a company can experience with corporate restructuring-
1. Reduced Costs and Improved Business Efficiency
Restructuring often involves consolidating related entities to improve business performance. Such consolidations help minimize compliance costs.
For instance, bookkeeping and tax preparation requirements can reduce when done for a single bigger company compared to multiple smaller entities. In most cases, this also leads to lower administration costs that can help a company when it is struggling financially.
2. Investment Opportunities
Business owners searching for investment opportunities often consider restructuring their company as it can help open more avenues to invest and grow.
For instance, if a corporate entity is structured as a limited company, then there are several restrictions on how the company can invest. But if the organizational structure of the company is modified, then the business owner can benefit from several investment opportunities.
3. Minimize Risk
A business is made up of various departments. In case if a specific department is making losses, separating that department from the company by forming a new subsidiary can help reduce the financial risks.
For instance, companies that have property assets often hold them through a separate subsidiary or company to protect them. Restructuring consultants, based on the requirements of a company, can suggest measures to safeguard business assets through separation or consolidation.
4. Tax-Efficient Operations
Tax efficiency is another vital advantage of corporate restructuring. By reorganizing the business structure, a company might be eligible to benefit from several tax provisions that can help significantly reduce the tax liability.
But as matters related to taxation can be complex and lead to litigations, only restructuring professionals and tax consultants should be relied upon for best results.
5. Resolving Shareholder Disputes
There can also be a difference of opinion among the shareholders about how the business should be taken forward. Time-consuming legal measures are relied upon to resolve such high-stake disputes.
But before resorting to such measures, a company can also consider corporate restructuring strategies like share redistribution or demerger to resolve such deadlocks.
Company Restructure for Improved Business Performance
There can be several reasons why a company could consider business restructuring. But no matter what the reason is, the expertise of a professional restructuring consultant is of utmost importance to achieve the expected results.
As qualified professionals have assisted several companies through such restructuring processes, their guidance can help a company resolve its internal problems and take maximum advantage of the current business scenario.