CORPORATE RESTURCTURING

&
REORGANIZATION

BY
HARIPRIYA THARIGONDA
122033101051
BALLB
7TH SEMESTER
 What is corporate restructuring?

Corporate restructuring is the process involved in changing the organization of a

business. This involves significantly changing an entity’s business model, financial
structure, or management team, to address challenges and increase value for
stakeholders. The corporate restructuring may involve employee retrenchment at any
scale, or bankruptcy or both. Restructuring processes are usually designed to reduce the
impact on employees, and statutory laws are also designed to protect the interest of the
employees first.
 Types of Corporate Restructuring
and
Reorganization
• Merger: The combination of two or more companies into a single company.
• Acquisition: The purchase of one company by another company.
• Spin-off: The creation of a new company from an existing company.
• Divestiture: The sale of a business unit or asset.
• Leveraged buyout: A management team or private equity firm acquires a company
using a significant amount of debt.
• Bankruptcy: A legal process that allows a company to reorganize its debt and operations
in order to avoid liquidation.
 Benefits of Corporate Restructuring

• Improved efficiency and productivity

• Reduced costs
• Increased profitability
• Improved market share
• Enhanced competitive advantage
• Access to new markets and resources
• Stronger financial structure
 The Companies Act 2013 bring various provisions
relating to mergers, compromise or arrangements in
particularly to cross border mergers, time bound and
COMPANIES single window clearances the enhanced disclosures
and simplified procedure for small companies etc.
ACT, 2013 Companies Act provides the Section 66 for reduction
of share capital, Section for restriction on purchase by
company of its own share and provides in the Chapter
XV for compromises, arrangements and
amalgamations from section 230 to 240.
 Rehabilitation under Companies Act, 2013
Chapter XIX of Companies Act, 2013 regulates the revival of all companies and not just
special industrial companies like under SICA. The rehabilitation process is carried out
by NCLT, which is a quasi-judicial body. The Companies Act, 2013 is relatively
efficient by provisions requiring higher creditor involvement in the revival process; a set
criterion to determine liquidity test; moratorium only on application to NCLT, creditor
committee to determine if company is to be liquidated or revived, approval of creditors
in rescue scheme, etc. Even though the provisions under Companies Act, 2013 has
improved substantially from the old regime, there are still certain challenges that need to
be addressed for effective functioning of the legal framework.
 Rehabilitation under Insolvency & Bankruptcy
Code, 2016

The code consolidates the insolvency process along with the restructuring and
rehabilitation process within a single legislation. The corporate insolvency resolution
process under the Code is creditor oriented and can be initiated even by financial
creditors or the debtor company being the insolvency applicants. When a debt is owed
by a corporate debtor, towards which it defaults, corporate insolvency proceedings can
be initiated. Instead of relying on the “sickness test” as prescribed under SICA and
Companies Act, 2013, the Code focuses on “cash flow test”, which is better at
determining extent of default and plausibility of revival.
Corporate restructuring under the Competition Act,
2002
The Competition Act of 2002 addresses the economic issues of mergers and
acquisitions. This Act establishes the commission to regulate the market by protecting
the economy from actions that would have a significant negative impact on
competition. Under the Competition Act, a merger and acquisition are referred to as a
combination.
Section 6 of the Act explains how to regulate combinations. This statute made it
mandatory to notify the commission of a planned merger or acquisition within 30 days
of receiving approval from the Board of Directors.
Satyam Computer Services (2009) Business failure due to fraud;
CASE LAWS
Reliance Industries Limited (2005) Incompatibility between promoter-successors.

Yes Bank (2020) Business failure due to crises induced by alleged fraud;

Aditya Birla Group

 CONCLUSION

Corporate restructuring tactics are critical to the development and growth of Indian
markets and require a variety of governmental permits to function properly. These
measures are implemented by a firm based on a variety of elements, including the
company's profile, stage of development, life cycle, management, objects and motives,
and so on. This varies depending on the company. To make the most of corporate
restructuring, every company must operate within regulatory frameworks and obtain
suitable and timely permissions under numerous legislation applicable to their industry.
Companies should always seek professional assistance to ensure compliance with all
regulations to avoid heavy penalties for any violations of the law.