CORPOTATE RESTRUCTURING

WHAT IS RESTRUCTURING? 1] ANY CHANGE IN THE BUSINESS CAPACITY OR PORTFOLIO THAT IS CARRIED OUT BY AN INORGANIC ROUTE OR 2] ANY CHANGE IN THE CAPITAL STRUCTURE OF A COMPANY THAT IS NOT IN THE ORDINARY COURSE OF ITS BUSINESS OR 3] ANY CHANGE IN THE OWNERSHIP OF A COMPANY OR CONTROL OVER ITS MANAGEMENT OR A COMBINATION OF ANY TWO OR ALL THE ABOVE.

 THERE IS NO STANDARD DEFINITION OF CORPORATE RESTRUCTURING. MAIN FORMS:1] MERGER 2]CONSOLIDATION 3]ACQUISITION 4] DIVESTITURE 5] DEMERGER- SPIN OFF/SPIT UP / SPLIT OFF 6] CARVE OUT 7] JOINT VENTURES 8] REDUCTION OF CAPITAL 9] BUY BACK OF SECURITIES 10]DELISTING OF SECURITIES/COMPANY

 MERGER IT INVOLVES COMBINATION OF ALL ASSETS, LIABILITIES, LOANS AND BUSINESSES[ ON A GOING CONCERN BASIS] OF TWO [ OR MORE] COMPANIES SUCH THAT ONE OF THEM SURVIVES. A+ B = EITHER A OR B MERGER IS PRIMARILY INORGANIC GROWTH. A STRATEGY OF

 CONSOLIDATION IT INVOLVES CREATION OF AN ALTOGETHER NEW COMPANY OWNING ASSETS, LIABILITIES, LOANS AND BUSINESSES [ON GOING CONCERN BASIS] OF TWO OR MORE COMPANIES . BOTH/ALL OF WHICH CEASE TO EXIST. A+B= C

 ACQUISITION ACQUISITION IS AN ATTEMPT OR A PROCESS BY WHICH A CO. OR AN INDIVIDUAL OR A GROUP OF INDIVIDUALS ACQUIRES CONTROL OVER ANOTHER COMPANY CALLED TARGET COMPANY. - ACQUIRING THE RIGHT TO CONTROL ITS MANAGEMENT AND POLICY DECISIONS. - ACQUISITION OF SHARES PURCHASE SUBSTANTIAL VOTING/ EQUITY CAPITAL ABSOLUTE CONTROL 100% EQUITY

 PRACTICALLY ABSOLUTE CONTROL- ABILITY TO GET ANY AND ALL RESOLUTION PASSED IN THE GENERAL BODY MEETING OF SHAREHOLDERS. A SECIAL RESOLUTION CAN BE PASSED IF THE VOTES CAST IN ITS FAVOUR IN A GENERAL BODY MEETING ARE NOT LESS THAN 3 TIMES THE VOTES CAST AGAINST IT. THRESH HOLD LIMIT FOR OPEN OFFER DIFFERS FROM COUNTRY TO COUNTRY UK 30%,HONGKONG35% SINGAPORE25%INDIA15%

 IN INDIA, IN TERMS OF REGULATIONS PROMULGATED BY SEBI, NO PERSON CAN ACQUIRE 15% OR MORE OF SHARE CAPITAL OF A COMPANY WITHOUT MAKING AN OFFER TO PUBLIC SHAREHOLDERS TO ACQUIRE MINIMUM 20% OF THE SHARES OF THE COMPANY FROM THEM. SUBSTANTIAL ACQUISITION OF SHARES CAN LEAD TO THREE SITUATIONS. A] EXISTING PROMOTERS BEING DISLODGED AS ACQUIRER STEPPING INTO THEIR SHOES AND BECOMING PROMOTERS.

 B] THE ACQUIRER MANAGING TO ACQUIRE MORE OR LESS THE SAME PERCENTAGE OR A LITTLE LESS PERCENTAGE OF SHAREHOLDING THAN THE EXISTING PROMOTERS-SAY NOT COMPLETE CONTROL- PARTIALLY SUCCESSFUL ACQUISITION C] THE ACQUIRER NOT MANAGING TO GET ANY REALLY SUBSTANTIAL PERCENTAGE OF SHARE CAPITAL.THIS WOULD BE AN UNSUCCESSFUL ACQUISITION. ACQUISITION OF A TARGET COMPANY THROUGH ACQUISITION OF AN INVESTMENT OR HOLDING CO. WHICH IS CONTROLLING THE TARGET COMPANY.

ACQUISITION OF CORUS BY TATA STEEL NOVELIS BY HINDALCO SPICE COMMUNICATION BY IDEA CELLULAR HUTCHISON ESSAR BY VODAFONE SAHARA AIRLINES BY JET AIRWAYS DECCAN AIRWAYS BY KING FISHER AIRLINES

 DIVESTITURE IT MEANS AN OUT AND OUT SALE OF ALL OR SUBSTANTIALLY ALL THE ASSETS OF THE COMPANY OR ANY OF ITS BUSINESS UNDERTAKINGS/DIVISIONS USUALLY FOR CASH [OR FOR COMBINATION OF CASH AND DEBT] AND NOT AGAINST EQUITY SHARES. DIVESTITURE IS NORMALLY USED TO MOBILIZE RESOURCES FOR CORE BUSINESS OR BUSINESSES OF THE CO. BY REALIZING VALUE OF NON-CORE BUSINESS ASSETS.

DEMERGER: 1] SPIN- OFF,2]SPLIT-UP AND 3]SPLITOFF SPIN OFF INVOLVES TRANSFER OF ALL OR SUBSTANTIALLY ALL THE ASSETS, LIABILITIES, LOANS AND BUSINESS[ ON A GOING CONCERN BASIS] OF ONE OF THE BUSINESS DIVISIONS OR UNDERTAKINGS TO ANOTHER CO WHOSE SHARES ARE ALLOTED TO THE SHAREHOLDERS OF THE TRANSFEROR CO. ON A PROPORTIONATE BASIS.

 SPLIT-UP: IT INVOLVES TRANSFER OF ALL OR SUBSTANTIALLY ALL ASSETS,LIABILITIES, LOANS AND BUSINESS[ ON GOING CONCERN BASIS] OF THE CO. TO TWO OR MORE COMPANIES IN WHICH, AGAIN LIKE SPIN-OFF, THE SHARES OF EACH OF THE NEW CO. ARE ALLOTED TO THE ORIGINAL SHAREHOLDERS OF THE CO. ON A PROPORTIONATE BASIS BUT UNLIKE SPIN-OFF THE TRANSFEROR CO. CEASE TO EXIST.

 SPIT-OFF IS A SPIN OFF WITH THE DIFFERENCE THAT IN SPLIT OFF, ALL THE SHAREHOLDERS OF THE TRANSFEROR COMPANY DONOT GET THE SHARES OF THE TRANSFEREE COMPANY IN THE SAME PROPORTION IN WHICH THEY HOLD THE SHARES IN THE TRANSFEROR COMPANY. MOST OF THE TIMES, IN SPLIT OFF, SOME OF THE SHAREHOLDERS GET SHARES IN THE TRANSFEREE COMPANY IN EXCHANGE OF SHARES IN THE TRANSFEROR COMPANY.

 NORMALLY SPLIT OFFS ARE USED TO REALIGN THE INTER SE HOLDING OF PROMOTERS WHILE BUSINESSES ARE BEING SPLIT-OFF AND BROUGHT UNDER CONTROL OF RESPECTIVE FACTIONS.`

 CARVE-OUT: IN CARVE OUT, A COMPANY TRANSFERS ALL THE ASSETS, LIABILITIES, LOANS AND BUSINESS OF ONE OF ITS DIVISIONS/UNDERTAKINGS TO ITS 100% SUBSIDIARY. THUS, AT THE TIME OF TRANSFER, THE SHARES ARE ISSUED TO THE TRANSFEROR CO. ITSELF AND NOT TO ITS SHAREHOLDERS. LATER ON, THE CO. SELLS THE SHARES IN PARTS TO OUTSIDERSWHETHER INSTITUTIONAL INVESSTORS BY PRIVATE PLACEMENT OR TO RETAIL INVESTORS BY OFFER FOR SALE.

 CARVE OUTS ARE NORMALLY USED TO MOBILIZE FUNDS FOR CORE BUSINESS OR BUSINESSES OF A COMPANY BY REALIZING THE VALUE OF NONCORE BUSINESSES.

 JOINT VENTURE: IT IS AN ARRANGEMENT IN WHICH TWO OR MORE COMPANIES CONTRIBUTE TO THE EQUITY CAPITAL OF A NEW COMPANY IN PREDECIDED PROPORTION 1] THE VENTURE MAY BE HIGHLY RISKY. 2] THE PARTNERS MAY OTHERWISE BE COMPETITORS BUT WANTING TO COLLABORATE FOR A SPECIFIC PURPOSE. 3] NEITHER OF THE PARTNERS MAY BE WILLING TO DILUTE CONTROL BY ACCEPTING EQUITY FUNDING.

 REDUCTION OF CAPITAL:THIS IS A LEGAL PROCESS U/S 100 TO 104 OF THE COSACT,1956 BY WHICH A COMPANY IS ALLOWED TO EXTINGUISH OR REDUCE LIABILITY ON ANY OF ITS SHARES IN RESPECT OF SHARE CAPITAL NOT PAID-UPOR IS ALLOWED TO CANCEL ANY PAID UP CAPITAL WHICH IS LOST OR IS ALLOWED TO PAY OFF ANY PAID UP CAPITAL WHICH IS IN EXCESS OF ITS REQUIREMENT.

 BUY-BACK OF SECURITIES AS A TOOL OF CAPITAL RESTRUCTURING. WHEN A COMPANY IS HOLDING EXCESS CASH, WHICH IT DOESNOT REQUIRE IN THE MEDIUM TERM, IT IS PRUDENT FOR THE COMPANY TO RETUTN THIS EXCESS CASH TO ITS SHAREHOLDERS. A CO.CANLIST EITHER ITS EQUITY SHARES OR PREFERENCE SHARES OR DEBT SECURITIES ON A STOCK EXCHANGE OR EXCHANGES. WHEN WE REFER TO DELISTING OF A COMPANY AS A FORM OF CORPORATE RESTRUCTURING, WE REFER TO DELISTING OF ITS EQUITY SHARES FROM ALL STOCK EXCHANGES.