Corporate Restructuring: A Comprehensive Legal Guide
Change is often necessary for survival and growth, whether due to economic shifts, evolving market demands, technological disruption or financial distress. One of the most strategic ways a company can adapt is through corporate restructuring.
In this guide, we explore the ins and outs of corporate restructuring – what it is, when it might be necessary, and how it can help you future-proof your organisation.
What is corporate restructuring?
Corporate restructuring is a broad term for the processes by which a company reorganises its structure, operations, or finances. This might involve changes to ownership, management, legal structure, or the company’s asset base.
The goal of restructuring is typically to make the business more efficient, profitable, or better aligned with its strategic objectives.
Examples of business restructuring
Some real-world examples of corporate restructuring include:
- Starbucks: In early 2025, Starbucks announced plans to lay off 1,100 corporate workers. Explaining the change to staff, CEO Brian Niccol said, “Our intent is to operate more efficiently, increase accountability, reduce complexity and drive better integration”.
- Royal Mail: To address the challenges of plummeting letter volumes and financial losses, Royal Mail is planning a strategic operational restructuring. The most significant change involves reducing second-class letter deliveries to every other weekday. The proposals are part of a larger effort to ensure Royal Mail’s viability.
- Rolls Royce: In 2023, Rolls-Royce announced plans for a “simpler, more streamlined, organisation”. The changes involved cutting over 2000 jobs worldwide, an “increased focus on efficiency, simplification and enterprise-wide synergies” and the strengthening of operational and commercial capabilities. Tufan Erginbilgic, Chief Executive, said: “We are building a Rolls-Royce that is fit for the future”.
Types of corporate restructuring
There are several different types of corporate restructuring strategies, including:
Divestment
Divestment sees a company sell off parts of its business – such as a subsidiary, division, or specific assets. Divestments can streamline operations, improve profitability, and release capital for reinvestment elsewhere in the business.
Corporate debt restructuring
Corporate debt restructuring might involve, renegotiating debt, refinancing loans, or changing the capital structure to improve liquidity and solvency,
Legal restructuring
Legal restructuring can include changing the company’s registered office, its jurisdiction of incorporation, or converting from a limited company to a public company (or vice versa). It may also involve establishing new legal entities or dissolving existing ones to achieve better regulatory positioning or simplify governance structures.
Mergers and acquisitions
When two businesses join forces, restructuring helps to integrate teams, systems, and processes. It also allows for the elimination of overlaps and the realignment of goals.
Demergers
A demerger is the opposite of a merger – where a company splits into two or more separate entities. This can unlock value for shareholders, allow distinct business units to operate with greater focus, or address regulatory concerns.
Organisational restructuring
Organisational restructuring could include flattening hierarchies, redefining roles, relocating teams, or introducing new reporting lines. This type of restructuring often follows leadership changes, mergers, or shifts in company strategy.
Operational restructuring
Operational restructuring can involve process improvement, supply chain optimisation, IT system upgrades, or workforce realignment. The goal is to reduce costs, eliminate redundancies, and boost productivity.
Reasons for corporate restructuring
Business restructuring can occur during times of distress or as a proactive strategic move. So, it can be as much about opportunity as about challenge.
Some of the most common reasons for business restructuring include:
- Financial difficulties: When liabilities outweigh assets or cash flow is under pressure, restructuring can help a business regain control.
- Growth or expansion: A company scaling rapidly might need to revise its internal structure to support sustainable growth and remove inefficiencies.
- Cost reduction: Streamlining departments or eliminating duplicate roles can reduce overheads and improve profitability.
- Regulatory or legal compliance: Changes in the legal or regulatory landscape may necessitate internal adjustments. This could include new tax legislation, data protection requirements, or sector-specific obligations.
- Leadership changes: A new board or senior management team may implement restructuring to align the business with their strategic vision and priorities.
In practice, many restructurings are multi-layered, simultaneously addressing several of these issues.
Corporate restructuring and insolvency
Corporate restructuring can be a lifeline for companies in financial difficulty. When managed correctly, restructuring can rescue a business and avoid the need for formal insolvency proceedings.
Key tools in this space include:
- Company Voluntary Arrangement (CVA): An agreement with creditors to repay debts over time while continuing to trade, CVAs give businesses the breathing space to turn things around.
- Administration: Protecting a company from creditor action, during administration the business may be sold, restructured, or returned to the directors in a better state.
- Pre-pack administration: With the business sold immediately upon entering administration, a pre-pack administration can protect jobs and preserve value in situations where time is of the essence.
- Time-to-Pay arrangement: A negotiated agreement with HMRC to spread tax payments over a longer period, a Time to Pay arrangement can ease cash flow pressures and help a business avoid enforcement action.
- Refinancing: Raising new finance or restructuring existing loans can provide critical funding and stability.
These mechanisms may allow companies to reorganise and continue trading, preserving value and safeguarding jobs. Legal advice is critical, as the consequences can be significant for directors and creditors.
Directors duties during corporate restructuring
Directors play a pivotal role in leading a business through restructuring. Their statutory obligations include acting in good faith to promote the company’s success, exercising independent judgment, and avoiding conflicts of interest.
Crucially, when a company faces financial distress and insolvency, directors must prioritise the interests of creditors. This includes during restructuring scenarios.
Key responsibilities include:
- Maintaining accurate financial records and monitoring solvency on an ongoing basis.
- Seeking professional advice at the earliest opportunity to understand options and reduce legal risk.
- Avoiding preferential treatment of creditors or transactions that may be seen as undervalue transfers.
- Ensuring decisions are clearly documented, showing a reasonable belief that actions taken are in the company’s best interest.
Advantages of corporate restructuring
- Improved efficiency: Streamlining operations can reduce waste, increase productivity, and sharpen your competitive edge.
- Stronger financial position: Debt reduction or refinancing can improve liquidity and open the door to new investment. Creditors may also be more supportive of businesses demonstrating a credible restructuring plan.
- Clearer strategic focus: Shedding non-core business units can allow greater concentration on profitable or high-growth areas critical for long-term planning and brand positioning.
- Enhanced market reputation: Taking proactive steps to address challenges can restore stakeholder and wider market confidence.
- Preservation of value: In insolvency-related restructurings, strategies can rescue viable parts of a business and protect employee livelihoods.
- Regulatory compliance and risk reduction: By reorganising around new regulatory frameworks, businesses can avoid penalties and mitigate future legal exposure.
Disadvantages of corporate restructuring
- Disruption to operations: Changing systems, processes, or teams can lead to short-term inefficiencies. This can be especially damaging if poorly managed or implementation is rushed.
- Impact on staff morale: Job losses or leadership changes can create uncertainty and anxiety among employees. Open communication and staff engagement are essential to maintaining morale.
- Costs: Restructuring may involve legal, advisory, and redundancy costs.
- Loss of institutional knowledge: Departing staff can take valuable experience and relationships with them. Succession planning and knowledge transfer must be considered as part of the process.
- Regulatory scrutiny: Depending on the sector, restructuring may trigger the need for regulatory approvals or notifications which can slow down and complicate implementation.
- Stakeholder resistance: Shareholders, employees, or creditors may oppose restructuring plans, especially if they believe their interests are at risk. Strong leadership and legal backing are crucial in these situations.
The corporate restructuring process
- Initial assessment: The process starts with a detailed analysis of the business’s financial, operational, and legal position. This involves identifying the core issues, risks, and opportunities that restructuring could address.
- Strategic planning: A tailored restructuring plan is developed in consultation with legal, financial, and operational advisers. This plan outlines the objectives, the scope of changes, stakeholder impact, and an estimated timeline.
- Stakeholder engagement: Key stakeholders are consulted or informed depending on the nature of the changes.
- Implementation: The restructuring plan is executed. Legal documentation, HR procedures, and regulatory filings are typically part of this phase.
- Monitoring and adjustment: Once implemented, the new structure is monitored to ensure it delivers the intended outcomes. Adjustments may be made to address any unexpected challenges or to optimise performance.
- Post-restructuring review: A final review evaluates the effectiveness of the restructuring and identifies lessons for future governance or operational improvements.
How our corporate restructuring solicitors can help
Whether you’re facing financial pressure or seizing an opportunity for growth, the process requires careful planning, clear communication, and professional guidance.
Our experienced insolvency solicitors work closely with directors, stakeholders, and insolvency practitioners to deliver bespoke restructuring solutions. We help you understand your options and make informed decisions.
We can help with:
- Advising on the legal and strategic implications of the proposed restructuring
- Drafting and reviewing restructuring plans and supporting documentation
- Negotiating with creditors, investors, and other stakeholders
- Supporting Company Voluntary Arrangements (CVAs) and administrations
- Ensuring compliance with directors’ duties and insolvency legislation
- Managing redundancies, TUPE, and other employment issues
- Facilitating mergers, acquisitions, and demergers
- Assisting with regulatory notifications and approvals
- Supporting businesses through post-restructuring transition and governance
Corporate restructuring FAQs
Not at all. Many businesses restructure proactively to stay competitive, streamline costs, or position themselves for growth. Restructuring can be as much about taking opportunities as avoiding crises.
The timeline varies depending on complexity. Some restructures can be completed within weeks, while others may take several months or longer.
Possibly. Some restructures involve redundancies or changes to working arrangements, while others preserve jobs. Employers must follow fair consultation procedures and comply with UK employment law.
Yes, sometimes, restructuring can rescue a business and avoid formal insolvency proceedings. Tools like CVAs and administrations are designed to give businesses breathing space to recover.
Yes. There may be tax consequences depending on the nature of the restructuring, such as capital gains, stamp duty, or VAT considerations. It is important to involve tax advisers early in the planning phase.
Start by assessing the financial and operational position of the business. Engage with legal and financial advisers to explore options. Early action gives you the most flexibility and widest range of tools.
Contact our corporate restructuring lawyers today
If you are considering a restructuring or simply want to explore your options, contact our team today for a confidential consultation. Our corporate insolvency solicitors are here to support you at every stage of your business journey, from stability to transformation.
For your free consultation, please call us on 020 7467 3980 or complete our online enquiry form to discuss how we can help.