Corporate Restructuring Procedures When Your Firm Is Under Distress
Corporate restructuring is necessary to keep the vitality of any company. Leaders of the firm should consider corporate restructuring as a normal part of business.
In particular, you should discuss corporate restructuring in your annual strategic planning sessions. It is better to make many small adjustments to the firm’s direction than an about-face after several years of lax oversight.
Likely, you are reading this after your firm is in trouble and needing drastic corporate restructuring. This is common. We usually don’t think about corporate restructuring until our firms are facing bankruptcy.
If that is your case, let us give you a 4-Step Procedure to get your firm back on track.
1. Make sure that you and your leadership team and your directors are as personally protected as much as possible. When you firm is in trouble, you are vulnerable to lawsuits from creditors and others wanting to cash in on your distress. You should make sure that you top leaders are protected by a Directors and Officers policy.
In addition, you should encourage estate planning that will help protect personal assets against personal lawsuits. By knowing that everyone is “safe”, you and your team can focus and devote all efforts against the corporate restructuring.
2. Oversee all cash collections and payments. You must take complete control of cash in your firm. Do not delegate this. If you control your cash carefully, you will never overspend and run out of cash.
3. Discover your core business. This is critical to any corporate restructuring. You must find those units, products, services and customers that make profit and cash for your firm. These moneymakers are your core business.
Don’t let anyone else try to tell you that you “must” keep a money loser because it is important to the firm. Fire that person. You are in survival mode and you cannot keep any stragglers regardless of its history or prospects.
4. Develop and carry out your corporate restructuring plan. Cut everything that is not part of your core business. That means people, customers, units, products and services. Likely, you will reduce your firm by 60 to 80 percent. This is normal when your firm is in deep trouble.
This is just outline of how to fix and rebuild a troubled company. For a thorough understanding of corporate restructuring procedures, we recommend that you read The Insider to Saving Your Business: The Step-by-Step Turnaround Guide.