Group Restructuring to Drive Organizational Change

With constantly evolving economic conditions, firms come across the need to undergo organizational change to remain competitive and finance future growth. The pressure to restructure could be a result of burgeoning group structures, tight cash flows, inefficient operations, fall in corporate governance standards or due to a pending merger or acquisition. Group restructuring offers an avenue to address these situations. Group restructuring enables reduction in risk exposure, rationalization of group structures, compliance with changing regulations, improved operations, efficient capital structures and tax benefits.

Group Restructuring can be a complex task and is vital that companies are well prepared to undertake the operation. Share Capital Reduction through a Court-Free Process and Liquidation are two popular methods adopted in Hong Kong for restructuring.

Share Capital Reduction through a Court-Free Process

Changes in the company’s business strategy may result in the company having more issued share capital than is required for its operation and growth. Pursuant to the Companies Ordinance (Cap. 622) of Hong Kong SAR, companies can take advantage of the court-free process in Hong Kong to conduct capital reduction to optimize excess capital. Based on the uniform solvency test, the procedures for capital reduction have been streamlined to enable all companies to restructure efficiently and in a cost-effective manner.

What are the purposes of capital reduction?  

• To return excess capital to members
• To cancel paid-up capital if the company has significant losses in business operation
• To create reserves arising from the capital reduction which may be distributed to members as dividends or set off against future losses

Liquidation

The COVID-19 outbreak has been developing so quickly that companies are working hard to deal with various challenges and mitigate the negative impacts to business.

Management may consider the need to restructure and eliminate inactive companies that have become redundant to achieve efficiency by freeing up management time and efforts dealing with such companies and reducing ongoing maintenance costs. To liquidate a company is a common way of dissolving a company. During the course of liquidation, the share capital and surplus assets, if any, of the company would be distributed back to the shareholders.

How Tricor can help in liquidation?

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