Restructuring your business — where to start
With myriad challenges facing WA businesses, now is the time to evaluate operations and consider whether restructuring your business is worthwhile.
A skilled labour shortage, supply chain delays and rising costs have many WA businesses facing greater challenges, with profit margins also squeezed.
This has meant that businesses have had to adapt to meet the new challenges. Now is a good time for any business to evaluate how they have operated in the past and whether they can continue to operate in the way they have in the future.
In these times, it’s always worthwhile considering restructuring your business to suit the economic conditions it faces.
Here’s what you need to consider:
What is involved in a business restructure?
Restructuring can take many different forms such as:
- Creating new companies or trusts;
- Transferring business assets to different or new entities; or
- Selling non-performing parts of a business.
These changes can boost profits, improve processes or adapt to the changing needs of your business.
Changing your business structure can also be necessary as your business grows, for example shifting from a sole trader to a partnership or registering as a company.
It’s important to note, though, that a business structure change can have implications for your business’s legal and tax obligations as well as your personal liability.
Common issues when restructuring
When going through this process, businesses will need to manage:
- Communications with key stakeholders;
- Contract arrangements with customers, suppliers and employees;
- Taxation issues to ensure any changes are tax effective;
- Asset protection and security arrangements; and
- Business governance.
Things to consider before you restructure
CCIWA Associate Director HR & Workplace Relations Ryan Martin says in the current business environment, businesses are focusing on what's important and core to their operations and what will help keep their business afloat.
If streamlining the business is the end goal, then this may involve restructuring the business’ operations.
Other things to consider:
- What kind of structure are you changing to?
- Do you have a business plan for your new structure?
- Do you need to apply for a new ABN?
- Do you need a new business name or trademark?
- Have you looked at your partnership agreement or corporate governance structure?
- What other agreements do you need to have in place?
- Are there any changes to your tax obligations?
- Do you know what you need to transfer?
You will also need to update your business details.
What happens to staff during a restructure?
When seeking to restructure the business for financial reasons, this may often lead to redundancies for some staff.
“We are seeing businesses look to focus on core areas, rather than the ones that are inefficient, difficult to find staff for, or otherwise not essential to the business’ operations,” says Martin.
In these scenarios, business owners and HR personnel need to be very aware of their obligations and staff entitlements under the relevant legislation and industrial instruments, which may differ depending on your business structure and industry.
It is always best to seek advice before making any definite decisions around redundancies, as you may need to consider consultation requirements, redundancy payments and possible redeployment options for staff, or transfer of business rules.
“If you seek advice after you commence this process, you may miss certain legal steps that give rise to unfair dismissal claims,” says Martin.
READ MORE: Make the most of staff following restructure
There are myriad complexities to consider during a business restructure.
To ensure you are complying with all relevant State and Federal laws, it is best you seek professional legal advice.
The CCIWA commercial law team has the expertise and knowledge to guide you through the restructuring process, whether it is through drafting new contracts or providing clear advice about how you can best optimise your business for a more prosperous future.