Corporate Restructuring
Corporate Restructuring means any change in the business capacity or portfolio that is carried out by inorganic route or any change in the capital structure of a company that is not in the ordinary course of its business or any change in the ownership of a company or control over its management or a combination of any two or all of the above.
Reasons for corporate restructuring:
Restructuring a corporate entity is often a necessity when the company has grown to the point that the original structure can no longer efficiently manage the output and general interests of the company. For example, a corporate restructuring may call for spinning off some departments into subsidiaries as a means of creating a more effective management model as well as taking advantage of tax breaks that would allow the corporation to divert more revenue to the production process. In this scenario, the restructuring is seen as a positive sign of growth of the company and is often welcome by those who wish to see the corporation gain a larger market share.
Types of Corporate Restructuring
Mergers / Amalgamation
Acquisition and Takeover
Divestiture(or Disinvestment)
Demerger (spin off / split up / split off)
Reduction of Capital
Joint Ventures
Buy back of Securities
Slump sale
Merger / Amalgamation: A merger is a combination of two or more businesses into one business. Laws in India use the term ‘amalgamation’ for merger. Amalgamation is the merger of one or more companies with another or the merger of two or more companies to form a new company, in such a way that all assets and liabilities of the amalgamating companies become assets and liabilities of the amalgamated company.
Merger through Absorption:- An absorption is a combination of two or more companies into an ‘existing company’. All companies except one lose their identity in such a merger. For example, absorption of Tata Fertilisers Ltd (TFL) by Tata Chemicals Ltd. (TCL).
Merger through Consolidation:- A consolidation
Reasons for corporate restructuring:
Restructuring a corporate entity is often a necessity when the company has grown to the point that the original structure can no longer efficiently manage the output and general interests of the company. For example, a corporate restructuring may call for spinning off some departments into subsidiaries as a means of creating a more effective management model as well as taking advantage of tax breaks that would allow the corporation to divert more revenue to the production process. In this scenario, the restructuring is seen as a positive sign of growth of the company and is often welcome by those who wish to see the corporation gain a larger market share.
Types of Corporate Restructuring
Mergers / Amalgamation
Acquisition and Takeover
Divestiture(or Disinvestment)
Demerger (spin off / split up / split off)
Reduction of Capital
Joint Ventures
Buy back of Securities
Slump sale
Merger / Amalgamation: A merger is a combination of two or more businesses into one business. Laws in India use the term ‘amalgamation’ for merger. Amalgamation is the merger of one or more companies with another or the merger of two or more companies to form a new company, in such a way that all assets and liabilities of the amalgamating companies become assets and liabilities of the amalgamated company.
Merger through Absorption:- An absorption is a combination of two or more companies into an ‘existing company’. All companies except one lose their identity in such a merger. For example, absorption of Tata Fertilisers Ltd (TFL) by Tata Chemicals Ltd. (TCL).
Merger through Consolidation:- A consolidation