A Guide To Financial Restructuring
Reasons to choose Wilson Browne
Considering corporate financial restructuring as a way to reduce your business liabilities and boost profitability?
Fortunately, the expert team of experienced business solicitors here at Wilson Browne Solicitors is on hand to provide professional advice.
We explain what’s involved in financial restructuring, when your business might need it, and why this process can make all the difference to the success of your company.
On this page:
- What is financial restructuring?
- Why is financial restructuring important?
- What is an example of financial restructuring?
- What are the steps of a financial restructure?
- Determine your restructuring goals
- Analyse your financial situation
- Seek expert support
- Decide upon a new structure
- Continually assess the structure
- Expert support with corporate financial restructuring
- Frequently Asked Questions (FAQs)
What is financial restructuring?
As the name suggests, financial restructuring refers to a process of making substantial changes to your company’s existing financial structure. Often, financial restructuring is implemented during a time of financial duress.
In these circumstances, business managers need to make difficult and crucial decisions – usually under significant pressure – to keep the business afloat.
Financial and non-financial reasons can give rise to corporate financial restructuring, but the most common reason for financial restructuring is when a business cannot pay its debts.
Why is financial restructuring important?
The ultimate aim is to prevent further financial loss by reducing costs, increasing profitability, and improving efficiency.
It can involve the valuation of firm assets and liabilities, negotiation with creditors to reduce debt, or even the introduction of new technologies to boost efficiency.
What is an example of financial restructuring?
Some of the most common examples of financial restructuring relate to cutting costs.
To significantly cut costs as part of its restructuring strategy, a business might choose to close unprofitable branches or embrace virtual meetings and cost-saving technology.
What are the steps of a financial restructure?
Unsure where to start when it comes to corporate financial restructuring? We explain the key steps of any financial restructure in more detail below.
Determine your restructuring goals
Attempting to reduce or eliminate your debts by saving costs? Or maybe you want to become more efficient by downsizing?
Before you can delve any further into the financial restructuring process, it pays to have a plan.
The first step to creating a successful corporate financial restructuring strategy is therefore deciding which objectives you want to achieve.
Analyse your financial situation
As one of the main reasons for financial restructuring typically involves cutting costs, it’s crucial that you assess all your financial assets and liabilities. From your overheads to your non-essential costs, carrying out this financial audit is the best starting point.
You may even want to hire an external accountant who can recommend financial and tax obligation improvements as well as tools that can improve efficiency and save you money.
Seek expert support
Financial restructuring often affects every aspect of a business, including the employees, stakeholders, and customers. The closing of branches to save costs, for example, can have a substantial impact on staff and your customers.
To limit the impact of any negative consequences of restructing, like redundancy for example, and ensure you’re acting within the confines of the law, it’s vital that you seek relevant professional legal support.
Decide upon a new structure
Naturally, once you’ve assessed your current financial situation and enlisted the right support, you can decide how your new financial structure should work. A business solicitor can play an instrumental role at this stage, explaining the various advantages and disadvantages of your proposed or desired new financial structure.
Continually assess the structure
After creating the new financial structure for your business, you’ll need to monitor the situation to ensure it’s creating the desired results. If it’s falling short of your expectations, then you’ll need to be prepared to change your approach until you begin to achieve your initial restructuring objectives.
Expert support with corporate financial restructuring
Businesses can decide to restructure for a wide range of reasons, but if you’re currently considering corporate financial restructuring, don’t hesitate to contact the award-winning team of corporate and commercial solicitors at Wilson Browne.
Regardless of whether you have legal, commercial, or practical concerns, we have accumulated years of invaluable experience helping companies in the manufacturing, engineering, logistics, and medical industry to successfully restructure their business.
By taking the time to truly understand the reasons for your restructure, we can provide you with clear and pragmatic legal advice to ensure you make the right decisions when it comes to restructuring your business.
Frequently Asked Questions (FAQs)
What is corporate financial restructuring?
Corporate financial restructuring is the process of reorganising a company’s finances, operations, or business structure to improve performance, reduce liabilities, increase efficiency, or address financial difficulties.
When should a business consider financial restructuring?
A business may consider restructuring when it is experiencing cash flow problems, struggling to meet financial obligations, facing declining profitability, undergoing significant growth, or looking to improve operational efficiency.
Does financial restructuring mean a business is insolvent?
Not necessarily. While restructuring is often associated with financial distress, many businesses undertake restructuring proactively to improve profitability, streamline operations, or prepare for future growth.
What are the benefits of financial restructuring?
The benefits can include:
- Improved cash flow.
- Reduced debt obligations.
- Greater operational efficiency.
- Increased profitability.
- Better use of company resources.
- Enhanced long-term business sustainability.
Can financial restructuring involve reducing staff numbers?
In some cases, yes. A restructuring programme may involve redundancies, changes to staffing structures, or departmental reorganisation. Employers must ensure any employment law obligations are properly managed throughout the process.
How long does a financial restructuring take?
The timeframe will depend on the size and complexity of the business and the changes being implemented. Some restructures can be completed within a matter of weeks, while larger projects may take several months or longer.
Will creditors need to be involved?
Potentially. If part of the restructuring involves renegotiating debt, payment terms, or financing arrangements, discussions with creditors, lenders, and other stakeholders may be necessary.
What legal issues should businesses consider when restructuring?
Businesses should consider a range of legal issues, including:
- Employment law and redundancy obligations.
- Director duties and corporate governance.
- Commercial contracts.
- Financing arrangements and security documents.
- Property and lease obligations.
- Regulatory compliance requirements.
Seeking legal advice early can help identify risks and avoid costly mistakes.
Can restructuring help avoid insolvency?
In many cases, yes. A well-planned restructuring can improve cash flow, reduce costs, and strengthen the financial position of a business, helping it avoid formal insolvency proceedings.
What role does a solicitor play in a financial restructuring?
A solicitor can advise on the legal implications of the proposed restructuring, negotiate with stakeholders, review contractual obligations, assist with corporate transactions, and help ensure the restructuring is implemented in a legally compliant and commercially effective way.
Is financial restructuring suitable for small businesses?
Yes. Financial restructuring is not limited to large corporations. Small and medium-sized businesses can often benefit from reviewing their financial and operational structures to improve efficiency and support future growth.
How can Wilson Browne help with financial restructuring?
Our Corporate and Commercial team can provide practical legal advice throughout the restructuring process, helping businesses assess their options, manage legal risks, protect stakeholder interests, and implement effective restructuring strategies that support their long-term objectives.
To support companies with their business restructuring plans across the UK, we’ve opened branches in Corby, Kettering, Wellingborough, Higham Ferrers, Leicestershire, and Northamptonshire.
Alternatively, you can always give us a call on 0800 088 6004 to speak to one of our expert solicitors for free, or get in touch using our convenient online contact form.