v Balance Sheet Restructuring Form Splitting and

v Balance Sheet Restructuring Form • Splitting and Creation of New BS • • Revaluation of Assets Rescheduling of Debts Changing the capital structure i. e. DER Divestment

v Balance Sheet Restructuring: Objectives • Strengthen the BS • Improve the EPS • Facilitate Privatisation • Improve the Overall Financial Performance

v Why Revaluation? •

v Using national account data, we define corporate balance sheet adjustment episode as periods during which major increases in non-financial corporations” net lending/borrowing are experienced. An analysis of such episodes in certain European countries and a more systematic exploration of a sample of 30 other countries, show that corporate balance sheet adjustment tends to be long lasting and associated with significant effects on current accounts, wages and investment. Adjustment episodes lead to significant changes in corporate balance sheets ratios with a build-up of liquidity and a reduction of leverage. The adjustment is generally achieved by reducing investment and increasing savings on the back of a falling wage share. A panel economic exercise shows that balance sheet adjustment periods are triggered by macroeconomic downturns as well as balance sheet stress due to high debt, low liquidity and negative equity price shocks.

v There is now ample evidence that deep economic crises are associated with stress in public and private sector balance sheets and followed by protracted periods of balance sheet adjustment. However, while economists have recently spent much time assessing sovereign debt and the financial health of banks, the balance sheets of non-financial corporations have been subject to less scrutiny.

v Corporate restructuring is a change in the business strategy of an organization resulting in diversification, closing parts of the business, etc. to increase its long term profitability. Corporate restructuring is defined as the process involved in changing the organization of a business. Corporate restructuring can involve making dramatic changes to a business by cutting out or merging departments that often has the effect of displacing staff members.

v Corporate Restructuring could be done through mergers, demergers, reverse mergers, disinvestment, takeover / acquisition, joint ventures, strategic alliances, slump sale, buy back etc. It has now become a regular exercise. It is a win-win situation for all including Bankers – A call to be made by Bank when Scheme is sent.

v The opening up of the Indian economy and the government’s decision to disinvest, and take apart certain qualitative and quantitative fetters has made corporate restructuring more relevant today, bound by the present economic scenario and market conditions. In the last few years, Indian corporate sector has followed the worldwide trend in consolidation of companies through mergers, acquisitions and strategic interventions.

v Objectives of Corporate Restructuring • • • To unload loss making Businesses To Eliminate Debt To Respond to Changing Trends To Meet Regulatory Change To order redirection of the firm’s activities To Organize surplus cash from one business to financed profitable growth in another • To reduce risk • To develop core competencies • To improve Debt-Equity ratio • To obtain tax benefit by merging a loss making company with a profit making company • To have a better market share • To eliminate competition between the companies.

v Needs of Corporate Restructuring Ø To focus on core strengths, operational synergy and efficient allocation of managerial Capabilities and infrastructure Ø Consolidation and economies of scale by expansion Ø Revival and rehabilitation of a sick unit by adjusting losses of the sick unit with profits of a healthy company Ø Acquiring constant supply of raw materials and access to scientific research and technological developments Ø Capital restructuring by appropriate mix of loan and equity funds to reduce the cost of servicing and improve return on capital employed.

v Merger is the combination of two or more companies which can be merged together either by way of amalgamation or absorption. The combining of two or more companies is generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. • • Horizontal Merger Vertical Merger Co generic Merger Conglomerate Merger

v Demerger It is a form of corporate restructuring in which the entity’s business operations are segregated into one or more components. It is the converse of a merger or acquisition. A demerger may possible through a Spin off, Split up and Sell off. • Spin off • Split up • Sell off

• • Reverse Merger Disinvestment Takeover / Acquisition Joint Venture (JV) Strategic Alliance Franchising Slump sale Buy Back

v Risks of Corporate Restructuring • The company fails to improve its business position and is forced to close • A poorly managed restructuring can introduce greater uncertainty with shareholders and result in stock price declines • Even well-executed restructuring can threaten a business’s trustworthiness and brand • Restructuring in some severe cases may also involve greater government control over decision-making at the company, especially in serious economic times.

v Corporate Restructuring – Would Court Lift Veil? Once a transaction between a holding company and its subsidiaries, is found to be fraudulent or sham and against the interests of shareholders, investors, parties to contract or designed to evade taxes, the court is entitled to lift the corporate veil and examine the substance of the transaction. The doctrine of “Lifting the corporate veil” is readily applied in cases coming within the purview of Company Law, Law of Contract and Law of Taxation. Once a transaction is shown to be fraudulent, sham, circuitous, or a device designed to defeat the interests of the shareholders, investors, parties to the contract and also for tax evasion, the Court can lift the corporate veil and examine the substance of the transaction said the Supreme Court in Vodafone International Holdings B. V. v. Union of India & Anr [2012(1) Comp LJ 225 (SC)]

v Corporate Veil is required to be lifted because a company has no mind or body of its own and therefore, it has to rely on human agencies to be formed and to act. There may be circumstances that culpable human agencies are trying to do something in colorable manner. A human being might be trying to do something in the shade of corporate veil what he cannot do himself as an individual. By doing all the above, he might be trying to cheat the public in general and be infringing their rights.

v THANK YOU

BALANCE SHEET OF LIFE The happiness of life is made of little things - a smile, a hug, a moment of shared laughter - its not the wealth you amass but what you give to others & the lives you touch that you take with you for eternity!

Our Birth is our Opening Balance! Our Death is our Closing Balance! Our Prejudiced Views are our Liabilities Our Creative Ideas are our Assets Heart is our Current Asset Soul is our Fixed Asset Brain is our Fixed Deposit

Thinking is our Current Account Achievements are our Capital Character & Morals, our Stock-in-Trade Friends are our General Reserves Values & Behaviour are our Goodwill Patience is our Interest Earned Love is our Dividend Children are our Bonus Issues Education is Brands / Patents

Knowledge is our Investment Experience is our Premium Account The Aim is to Tally the Balance Sheet Accurately. The Goal is to get the Best Presented Accounts Award.

1 When you were born It is Opening of a Financial Year 2 3 Your Everyday Is like a Journal Entry Whenever you meet someone It is a Transaction 4 When you make someone smile Or Someone makes you smile It is like a Contra Entry 5 When you help someone and your help is acknowledged It is a Cash Sales 6 When you help someone without It is a Credit Sales any Acknowledgement 7 When someone helps you and you are thankful to them It is like a Cash Purchases 8 When someone helps you and you are not thankful to them It is like Credit Purchase

9 When you hurt someone (By act It is like abnormal loss or deeds or words) 10 But if you make an Apology for the same It is like Insurance claim received 11 12 When someone hurts you It is like a Bad Debt But if you forgive their such mistakes It is like recovery of Bad Debts. 13 14 When you are married It is like Amalgamation When you become Parents It is conversion of Firm in to a Company 15 When your children start taking their own decisions You are a Subsidiary, They are Holding Company. 16 17 18 When your children left you It is like Demerger When you Die It is end of Financial Year What after your death The Assessment Year starts

v All your files are posted to God’s Chartered Accountant, CHITRAGUPTA MAHARAJ. He will vouch and prepare your Balance Sheet. • • In HIS books of Accounts – HUMAN NO…… Balance Sheet for the Life Ended on ………………. . So Remember • • Your Life is a Gift of GOD Being a True Chartered Accountant will be your Gift to GOD BEST OF LUCK For your outstanding Balance Sheet in books of GOD and of course for Today’s Seminar Knowledge – Experience – Service to Others