Guide to: Restructuring Your Business

How should you restructure your business? Learn more about your business restructure options.

There are many reasons to consider a company restructure: you may be experiencing or looking to enable a period of growth, you may wish to re-think or streamline your business operations, or you may be responding to financial factors by downsizing or looking to address company debt.

Whatever the reason, UK business owners have a wealth of restructure options available to them. Finding the best route for your company will depend on factors such as your strategic goals, operational needs, timelines and, of course, your organisation’s financial situation.

What company restructure options exist, and how do these restructures work? Explore six of your main options here.

If you want to learn more about any of the below choices, our expert Insolvency, Restructure and Demerger solicitors are here to help.

1. Internal Company Restructure

Sometimes a restructure doesn’t involve a purchase or sale but can be fully addressed internally. To do this, a company may reorganise its management structure, reduce staff, or redefine its operational processes to improve efficiency and profitability.

Before undertaking an internal company restructure you should consult with your senior management, HR, and an external consultant to make sure your changes are in the company’s best interests, have limited risk, and comply with your legal obligations to your employees, stakeholders and shareholders.

Internal Company Restructure Strengths & Weaknesses:

2. Demergers

A demerger involves separating part of your company into a new, independent business entity. This route is used when a company wants to re-address its business focus, either splitting different divisions into their own companies or narrowing down operational focus back to a core service offering.

Demerger Strengths & Weaknesses:

3. Mergers and Acquisitions (M&A)

Mergers & Acquisitions involve either combining with another company, purchasing another company to supplement your offering, or selling your company to another party.

M&As can provide access to new markets, products, and resources, as well as improve profitability. Pursuing these routes requires input from financial advisors, legal experts, and possibly business brokers.

M&A Strengths & Weaknesses:

4. Company Voluntary Arrangement (CVA)

A CVA is a formal agreement between a company and its creditors to pay off its debts over a set period – usually three to five years. This option is saved for companies facing financial difficulties but wish to avoid liquidation or formal insolvency.

CVA Strengths & Weaknesses

5. Debt Restructuring

Debt restructuring involves renegotiating the terms of a company’s debts with its creditors, potentially extending repayment periods, reducing interest rates, or swapping debt for equity.

This route is useful when a company faces cash flow problems or needs relief from debt obligation but wants to avoid formal insolvency or administration.

Debt Restructuring Strengths & Weaknesses

6. Employee Ownership Trust (EOT)

This previously lesser-known option is quickly increasing in popularity, especially amongst SME companies. EOTs are incredibly versatile, offering a strong restructure option in a range of company circumstances, but especially if you are looking to transfer business ownership while maintaining continuity and supporting employees.

Are EOTs right for you?

An Employee Ownership Trust allows business owners to sell their shares to a trust that holds them on behalf of the employees. The employees, in turn, become the beneficial owners of the company.

To achieve this, the company sets up a trust to purchase the shares from the owner. The trust is typically funded by the company, which then repays the loan over time using company profits.

In a period of restructure, this route protects ongoing company continuity and employee buy-in during what may otherwise be a period of disruption, and releases funds from the sale gradually, allowing any financial matters to receive immediate payments whilst providing a more gradual owner exit.

Starting your company restructure

At BHW Solicitors, we are passionate about EOTs and their potential to transform your business, but our Leicester-based solicitors are also experts in many other routes to commercial company restructure. We have been ranked Band 1 by Chambers and Partners in our merger and acquisition work in the SME/owner-managed sector, and stand out across our teams for our exemplary service.

If you need legal advice and support from our EOT experts or on any of the above pathways, contact our friendly solicitors today to get started.

Categorised in: Blog, Corporate and Commercial, EOT, Guides, News

Tags: Business Restructure, Company Law, EOT, Mergers and Acquisitions, Reorganisation