UNIT IV

IMPACT OF REORGANIZATION ON THE COMPANY- AN INTRODUCTION

4.1 CHANGE IN INTERNAL ASPECTS OF REORGANIZATION

4.1.1 Change of Name and Logo

Procedure -Change / Alteration of Name under Companies Act 2013

As per Section 4(2) of Companies Act 2013, it Provides that no company shall be registered by name which:

Is identical with or resemble too nearly to the name of an existing company registered under this Act or any previous company law, or: [Section- 2 (a)]

Will constitute an offence under any law for the time being in force, or: [Section- 2 (b)(i)]

Is undesirable in the opinion of the Central Government. [Section- 2 (b)(Ii)].

Sub Section-3 without prejudice (Effect) to the provisions of sub-section (2) [as given above], a company shall not be registered with a name which contains unless the previous approval of the Central Government has been obtained for the use of any such word or expression:

Any word or expression which is likely to give the impression that the company is in any way connected with, or having the patronage of, the Central Government, any State Government, or any local authority, corporation or body constituted by the Central Government or any State Government under any law for the time being in force; or [Section- 3 (a)].

Such word or expression, as may be prescribed. [Section- 3 (b)].

Alteration of Name shall not allow to following Companies:

The change of name shall not be allowed to a company:

1. Which has not filed annual returns or financial statements due for filing with the Registrar or
2. Which has failed to pay or repay matured deposits or debentures or interest thereon
3. After approval of name up to what time name shall be available to use.

As per Companies Amendment Act, 2017 In case of alteration of Name. Name shall be reserved for 60 days from the date of approval of name.

SOME IMPORTANT POINTS:

I. A change of name under section 21 does not affect the rights and obligations of the company or render defective any legal proceedings by or against it, and any legal proceedings, which might have been continued or commenced by or against the company by its former name, may be continued by or against the company by its new name.

II. The company which has changed its name would be entitled to ask those companies in which it is holding shares, to substitute its old certificates by new ones.

 The name once approved valid for 60 days from the date of making of application.

4.1.2 Revised organisational Chart:

Organisational Chart revision means keeping the organisation chart up to date on the organisation structure on the basis of reorganization of the business enterprise. It is the change or alteration of duties of the top level management, middle management and lower level management. The new business enterprise which is reorganized will take better decision to revised the responsibility of the various levels of management to run the business in a smooth manner.

4.1.3 Communication:

 When a business eliminates layers of management during its restructuring, communication and decision-making often improve. Simplifying management reorders the organizational hierarchy of a company, opening the lines of communication and removing barriers to productivity.

To Get Information Out:

To clarify the reasons for change

To describe the benefits of the change

To offer a detailed picture of the new organization

To describe how the change will take place

To provide information on support/resources

To Gather Information:

To get input from the people affected

To get feedback on how the change is proceeding

To Affect Attitudes and Behavior:

To show that change is a beginning, not an end

To create an atmosphere that supports the new identity/culture

To encourage risk-taking and openness to change

To move toward a collaborative team approach

To Offer Support During the Change:

To acknowledge loss/fear/resistance

To show how loss will be counteracted by the advantages of the new organization

To provide tools (training/information/praise)

To reduce isolation and foster teamwork

4.1.4 Employee Compensation:

Employee is one of the main body of any organization and anytime the company authority must take care about the employee compensation for any kind loss happened to the employee for any accident in the company or any where during the company duty hours. It is important to maintain proper provisions for the employee compensation for all business enterprise. It is more important for the reorganized business enterprise to fix such provisions.

4.1.5 Benefits and welfare activities:

In a reorganized business enterprise, the company authority must adopt the activities which will provide welfare to the employee. These kind of activities are helps to  increase the employees' motivation for the fulfilment of the business target.

4.1.6 Aligning company policies:

There are several key steps that you can take to establish a successful goal-setting and goal-alignment strategy in your organization.

Organizational alignment is a process of ensuring that the entire workforce understands, shares and supports the company’s vision and goals.

When employees are aligned with the company’s strategic goals, they give their best performance to achieve business goals together. Steps for alignment of policies:

a) Start at the Top. Organizational goal-setting must start with the executive team. ... b)Create a Cascade of Goals.

c)Drive Consistency and Accountability.

d)Encourage Continuous Communication.

4.1.7 Aligning Accounting and Internal database management system: Businesses use their databases to: I) Keep track of basic transactions.

II) Provide information that will help the company run the business more efficiently.

III) Help managers and employees make better decisions.

In a large company, special capabilities and tools are required for analysing vast quantities of data and for accessing data from multiple systems, such as

Data warehouse: a database that stores current and historical data from core operational transactional systems for use in management analysis, but this data cannot be altered.

Data mart: A subset of a data warehouse in which a summarized or highly focused portion of the organization's data is placed in a separate database for a specific population of users.

Business intelligence (BI) tools: Data analysis tools used for consolidating, analysing, and accessing vast stores of data to help in decision making, such as software for database query and reporting, tools for multidimensional data analysis (online analytical processing), and data mining. In a reorganized enterprise they must take necessary action to make necessary changes which is will be beneficial to the reorganized business enterprise.

4.1.8 Re-visiting internal process and Reallocation of people:

 After reorganization of  business enterprise it is important to revisit the whole internal process of the enterprise properly and allocate the people engaged in business enterprise in a manner that they have the proper knowledge and experience to manage and operate that type of particular responsibility. It is important to look into the weaknesses of  the people engaged in a particular duty and try to solve that kind of difficulties.

Key takeaways:

1. In case of internal reconstruction, change in name and logo, revised organisational Chart, Communication, Employee Compensation, benefits and welfare activities, Aligning company policies etc. Plays a major role for the future period.

4.2 Change in external aspects on the reorganization

4.2.1 Engagement with statutory authorities :

Government authorities are important part of the any kind of business enterprise because make rules which is applicable for any particular class of business therefore it is important to make discussion and take necessary action for the fulfilment of any legal business target. They must seek their instructions properly.

4.2.2 revised ISO certification and similar other certification:

ISO certification certifies that a management system, manufacturing process, service, or documentation procedure has all the requirements for standardization and quality assurance. ISO standards are in place to ensure consistency. Each certification has separate standards and criteria and is classified numerically.

The ISO 9000 family of quality management systems is a set of standards that helps organizations ensure they meet customer and other stakeholder needs within statutory and regulatory requirements related to a product or service.

In a Company, departments certified for ISO 9001 in the organization and recently there was a complete restructuring which has affected all departments.  Due to the restructuring, the department names & scopes were changed. Now most of the departments are having new name and a scope which is partially certified.  Though all employees have adapted the new structure & redesigned some processes.

4.2.3 revisiting past government approvals:

After reorganization of the business enterprise they must revisit the past government approvals to take advantage of that particular approvals which will be beneficial for the amalgamating entities. Sometimes, past government approvals may provide benefits to the business enterprise which are likely to be large one because such approvals may cause loss to the small business enterprise.

4.2.4 decision and other contracts:

 In case of Amalgamation business enterprise must take any decisions after considering all the aspects of the outcomes and subsidiaries which will be the main part of any business enterprise. A wrong decision may lose to the business.

Key takeaways:  

1. Reorganization is effected by both internal and external aspects, so  reorganised enterprise must keep proper eyes on these aspects too.

4.3  IMPACT OF REORGANIZATION:

The concept of reorganization can be defined as a significant change made to the debt, operations, or structure of a firm. The objective is that through reorganization actions, the firm can eliminate financial distress and improve overall performance of the business.

Theoretically, restructuring leads to a more efficient and modernized entity, however it may lead as well to the deletion of jobs and the layoff of personnel. The procedure of restructuring generally focuses on problems with financing debt and very often, involves selling portions of the company to investors.

4.3.1 GAIN OR LOSS TO STAKEHOLDERS:

Restructuring tends to indicate that a company is unstable and struggles to support itself. Therefore, when a business restructures, investors may question the company’s future. Small businesses supported by only a few investors may lose necessary funding if they are unable to provide reassurance.

4.3.2 implementation of objectives :

A key challenge in Merger and acquisitions in their effective implementation as  there are chances that mergers and acquisitions may fail because of slow integration. The key is to formulate in advanced integration plans that can effectively accomplish the goals of the merger and acquisition process. To implement the objectives of merger and acquisitions, some factors are required to be considered for post Merger success like legal requirement, combination of operations, top management changes , management of financial resources, rationalization of labour cost, production and marketing management and corporate planning and control.

4.3.3 integration of Business and operation:  

Due to reorganization business enterprise like to amalgamate themselves to the other competitor or other business to survive and make good for their loss and earn maximum profit in the near future. Integration help to make synergy which helps to cut unnecessary business expenses and make their decision best.

4.3.4 post merger success and valuation:

Post Merger success is a wide term which encompasses the reorganization of each and every aspect of the company's  functional areas to achieve the objectives planned and aimed it. To implement the objectives of merger and acquisitions, some factors are required to be considered for post Merger success like legal requirement, combination of operations, top management changes, management of financial resources, rationalization of labour cost, production and marketing management and corporate planning and control.

4.3.5 Impact on human and cultural aspects:

Due to reorganization business enterprise must take care about the human being as well as their cultural aspects which is the main aspects of all business enterprises. Human beings have more expectations that business enterprise will prepare the necessary items/goods which the choice of that particular class of people. After reorganization of the business enterprise it is mostly seen that if there is no common understanding between them then it will badly effects the business and there is chance of losing that particular class of people who are the genuine customer of the business enterprise.

Key takeaways:

1. After reorganization of business enterprise, various types of factors effects the business in a different manner, so business enterprise must look into the matter to control in a smooth manner.

Reference:

1. C.Mohan Juneja, Biplab Das, Atul Ch. Das Advanced Corporate Accounting, Kalyani Publishers
2. S.P.Jain, K.L. Narang- Advanced Corporate Accounting, Kalyani Publishers.
3. B.B. Dam, H.C. Gautam- Advanced Corporate Accounting, Gayatri Publications, Guwahati.
4. www.google.com