Reorganisation and Restructuring
There are many reasons why it may be necessary to reorganise or restructure your business, for example to make the most of additional funding or where the market in which you operate is experiencing significant changes and you wish to adapt. There are also a number of different elements of your business you can reorganise, such as the ownership, legal or operational elements, in order to make the company as profitable as possible.
In every case, it is vital to consider all the options carefully and to have a robust strategy in place. This will help to avoid any costly errors further down the line. It is also important to consult a restructuring and reorganisation solicitor as early in the process as possible. There is a lot to consider, as well as laws to comply with and key procedures to follow, and the advice of a company lawyer is highly beneficial throughout. Contact Altmore Business Law for practical and commercially-aware advice from within a team of solicitors and non-solicitors holding several professional qualifications and skill sets for your restructuring project. Call us on 0845 094 9000.
Restructuring and Reorganisation Services
When your business is changing the way it operates, our commercial solicitors can provide expert advice, including on:
- Reductions of capital
- Schemes of arrangement
- Company and group transfers (Hive up/hive down/transfer across)
- Business and asset transfers (Hive up/hive down/transfer across)
- Share buybacks
- Combinations of corporate change
Regardless of the route your business takes, we will provide tailored advice designed to promote your commercial goals and ensure your business is compliant with UK company law and regulations.
When making alterations to your business to make it more profitable, refinancing can be a useful method to ensure the financial stability of your company. Our business solicitors can advise on the complex legal matters involved. We will work closely with your accountants and tax advisers, as well as the bank or other corporate finance sources, to achieve the most favourable finance arrangement. Thanks to our extensive knowledge and experience in this field, you can trust that we will anticipate and fully inform you about any issues with your financial arrangements and provide advice on how to manage them so that your transaction remains on track.
We offer guidance on traditional and innovative refinancing options, for example:
- Bank loans
- Venture capital investment
- Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS)
- Angel investment
- and in the further ways outlined in bank finance law
Reduction of Capital
A business may choose to reduce its share capital as part of a process of reorganisation and restructuring, for example in order to support a share buyback or in connection with an intra-group reorganisation or simply to extract surplus moneys as capital rather than income. The Companies Act 2006 regulates how a company can reduce its capital. There are two procedures for doing so: special resolution confirmed by court order; or special resolution supported by a solvency statement from the company’s directors. The solvency statement route is the more straightforward process, but can be onerous for directors personally and is not available to every business and in every scenario.
At Altmore Business Law, our corporate specialists can advise on whether reduction of capital is the most beneficial option for your reorganisation project, and if so, guide you through the entire procedure.
Scheme of Arrangement
A scheme of arrangement (or a scheme of reconstruction) is designed by advisers to streamline business in some way and, all being well, after presentation to court leads to a court-approved agreement between a company and its shareholders and or creditors (e.g. lenders or debenture holders) under part 26 Companies Act 2006.
The Companies Act allows the court to approve schemes where there is not an obvious or straightforward procedure available within the participants’ constitutions or where company law is obscure or unhelpful or may be breached by what is envisaged – ie when a reorganisation cannot be achieved by other means. Schemes may be used for rescheduling debt, for takeovers, and for returns of capital, among other purposes, including the swapping of equity for debt, squeezing out minority shareholders, or making undervalue property transfers or share issues. There is no statutory limit on what might be devised and presented so long as the scheme is a genuine and effective arrangement or compromise. This means that the members and creditors of the company that participates in the scheme must obtain some advantage that compensates them for the scheme's alteration of their rights.
Crucially, the sanction of 75% of all relevant classes if supported by court order will be binding on 100% of those involved and thereby allow the company or group to get on with the reorganisation or restructuring it so badly needs.
A demerger may be an alternative to sale. A company (or group of companies) containing several businesses may be divided up. Initially the ultimate owners are usually the same but the companies or businesses are held in a different way. The other outcome possible is that some of the shareholders, eg one part of a family or group of shareholders hold some businesses and the other part hold other businesses.
Money does not in general change hands and instead shares are issued as consideration for the transfers. The businesses may continue to be run by separate parts of the family. However clearly a separation may in turn facilitate a subsequent sale of part of what was previously an entangled group of businesses by holding businesses only one or some of which the original owners wish to or are able to sell.
Given that with the correct structuring there is not initially a change in ultimate ownership taking place, relief from taxes on income and capital gains may be available and advance clearances from HMRC are often available, as they are with other forms of restructuring.
Reasons for demerger may not always be in anticipation of sale of part. The shareholders may have fallen out as a single camp and wish to operate independent businesses, or owners may see separate management and accountability as likely to provide efficiencies. Demerging may well allow different strategies to be pursued and or unlock value.
Share Buy Back
Here a company purchases shares in its own capital and because, unless placed into treasury, the shares acquired cease to exist, a buy back is another form of reduction of capital. The company must have its own cash resources to make the purchase, which - frustration for clients - cannot be by instalments or deferred. But this is not enough. The company must have reserves on its balance sheet against which an amount equal to the sum to be paid can be set. These may only be distributable profits (P+L) or, failing that, a capital account. The latter (capital) is unattractive because of the need to advertise in the London Gazette. The buy-back may be also effected out of a fresh issue of shares, as in a reorganisation and there is a simplified procedure for very small buy backs of up to £15,000.
Buy backs, like reductions, remain a tricky area because of long-standing background law intended to protect creditors, namely that a company must not relinquish its capital shown to the public at Companies House to have been invested or accumulated in it if entrepreneurs are to enjoy the protection of limited liability. A buy back in breach of background common law or the piecemeal 20th century statutory relaxation can render the buy-back void.
Our Areas of Reorganisation and Restructuring Expertise
Our hybrid group of professionals can assist with all aspects of your re-organisation and restructuring requirements. Working closely with your other advisers we will consider the great plethora of legal issues arising in these areas including:
- Analysis, due diligence and planning
- Share and asset transfers
- Meetings and procedures
- Availability, creation and utilisation of distributable reserves
- Book value and market value
- Distributions in specie/ kind
- Lawful and unlawful distributions
- Capital contributions outside the Companies Act 2006
- Third party consents and releases
- Contractual variations
- Solvency tests, statutory solvency statements
- Directors duties
- Defunct companies - striking off and voluntary liquidation
Contact our Reorganisation and Restructuring Lawyers Birmingham, London, Cambridge, Oakham, Nottingham & Loughborough Today
Transactions of these kinds do not come along every day for the everyday sort of law firm so instructing a specialist firm like Altmore Business Law is essential. Not only do we offer exceptional service, but also highly competitive fees for our services. Our expert team members understand and appreciate your concerns, which is why our complementary hybrid services are designed to cover every aspect of restructuring your business. We pride ourselves on providing a comprehensive service of the highest quality, without the price tag of large City firms. For an assessment of how our team can help you in restructuring or reorganising your business, contact us today by calling 0845 094 9000 or email firstname.lastname@example.org and we will get back to you right away.