Businesses wear many hats. They can be a manufacturer, retailer, buyer, employer, customer, statistic, or even a force for social good. It’s something we rely on, respect, and sometimes even love. Workers depend on its profits for their wages. Landlords expect rent and good upkeep of their property. Governments count on their taxes. And owners, families, and shareholders all have a stake in its success.
A thriving, long-standing business is a valuable asset – but nothing lasts forever. Markets shift, technology evolves, and what was once a top earner can quickly become obsolete. Bingo halls, VHS rental shops, and Woolworths were once staples, but are now consigned to history. The best entrepreneurs anticipate change and pivot early. The average ones react just in time. The weakest only wake up when the sheriff arrives with bankruptcy papers.
The reality of restructuring
At its core, restructuring is primarily about money. Costs must fall, profits per unit must rise, and products or services may need to change entirely. That could mean moving to cheaper premises, slimming down the workforce, or streamlining management.
But none of this happens in a legal vacuum. Restructuring touches on employment rights, property law, corporate governance, and financial compliance. Getting it wrong can be far more expensive than getting expert advice upfront.
Employment law: handle with care
People are at the heart of every business, and employment law gives them strong protections. You can’t simply lay off staff to cut costs. UK employment law requires a fair consultation process, proper notice periods, and statutory redundancy payments based on service, age, and pay. Skipping these steps risks costly tribunal claims.
If part of your business is being sold or transferred, TUPE regulations also apply – ensuring employees’ terms and conditions remain intact under the new employer. Failing to comply can derail deals and create long-term liabilities.
Property and premises have hidden costs
Relocating or downsizing premises is rarely as simple as handing back the keys. Commercial property deals involve complex documentation, compliance with planning laws, and negotiation over leases.
Breaking a lease early may trigger break clauses, surrender agreements, or landlord penalties. Even after vacating, continuing liabilities may linger. Legal advice is crucial to minimise exposure and negotiate favourable terms.
Reshaping the business structure
Sometimes restructuring means changing the business itself. New investors may come on board, requiring clear agreements to protect their interests, as well as those of the existing owners.
For sole traders or partnerships, that may mean drafting new partnership agreements or converting into a limited company, thereby unlocking benefits like limited liability and potential tax advantages. But incorporation must be carefully structured, with shares properly issued and a shareholders’ agreement in place to prevent future disputes.
Finance and security
Restructuring often involves fresh funding, such as loans, security over assets, or even personal guarantees from directors. These agreements must be precisely drafted, correctly executed, and registered where necessary.
Personal guarantees, in particular, carry lasting consequences and may remain enforceable even after a director leaves the business. Understanding these obligations upfront is essential before committing.
Don’t overlook the rules
Businesses in regulated sectors (e.g. financial services, healthcare, food) must maintain compliance throughout restructuring. A failure here could mean fines, licence loss, or operational shutdown.
Competition law may also come into play if restructuring involves acquisitions or market consolidation. Larger transactions may require formal approval, while even smaller deals must avoid anti-competitive practices.
The cost of good advice
Cutting corners on legal, tax, or structural advice is a false economy. Professional guidance not only reduces risk but can uncover efficiencies, tax savings, and strategic opportunities.
Smart business leaders keep one eye on the future and make sure their organisation evolves legally and commercially to match changing conditions. In today’s corporate climate, legal compliance isn’t just recommended – it’s a prerequisite for survival.
John Roberts is a Partner and Director at Austin Lafferty Solicitors. John has been with the firm for almost 20 years, with experience in all areas of business law.
