File ITR, invest & save upto
₹46,800 in taxes on the go
0% commission • Earn upto 1.5% extra returns
Reviewed by Sep 23, 2021| Updated on
An action taken by a company to drastically change the financial and operational features of the company is known as restructuring. This is typically done when the business is undergoing financial problems. It includes modifying the debt, operations, or structure of a company to limit financial harm.
Deteriorating financial fundamentals, lacklustre revenue from sales, poor earnings performance, and even exorbitant debt are some reasons to restructure. Other reasons include the fact that the company is not competitive anymore.
A company may restructure due to a sale, buyout, merger, turn in overall goals, or transfer of ownership. For example, a company could choose to restructure after it defaults to launch a new product or service successfully, which leaves it in a position where it cannot produce enough revenue to cover the payroll and its debt payments.
As a result, depending on the agreement by shareholders and creditors, the company can sell its assets, restructure the financial arrangements, issue equity to lessen debt or file for bankruptcy as the business maintains operations.