Step-by-step plan for reorganization: causes and consequences
Doing business involves looking ahead. To monitor the continuity of a company, it is important to identify risks at an early stage and to limit these where possible. Even when a company is in financial difficulty, there are various steps that can be taken to prevent bankruptcy. Reorganization requires a tailor-made approach, but a step-by-step reorganization plan can serve as a guideline in every situation.
Reasons for reorganizing
The decision to reorganize can have various reasons or causes. In general, a reorganization process is opted for with the aim of reducing or limiting the costs incurred by a company or organization. If no action is taken, the chances are that a company will not survive in the long term. As such, a reorganization is certainly also a way of preventing bankruptcy. Reasons for a reorganization include:
- Preventing or compensating for disappointing sales or losses
- A company opts for a new method by adopting new technological developments
- A possible merger or takeover makes (some of the) employees redundant
A step-by-step reorganization plan is available for each of the reasons for reorganizing a company, i.e. a blueprint of the necessary steps to be taken to successfully complete this process.
Step-by-step reorganization plan: a reorganization plan
A reorganization is a drastic process, in which speed and decisiveness go hand in hand with care and the human aspect. Within the step-by-step reorganization plan, the first step therefore revolves around the setting up of a clear and concrete reorganization plan. A company cannot reorganize without justification or reason, especially when the process involves the loss of jobs. The reorganization plan must include a representation of a company’s financial situation and an explanation of the reason or cause for the plan. In addition, the plan must describe which cost-saving measures have already been taken and how the new measures strengthen and improve the organization’s viability, effectiveness or productivity. This first step of the step-by-step reorganization plan must also provide an explanation of the organizational and personnel consequences that the measures entail.
Reorganization and dismissal of personnel
In reorganizations, the focus is mainly on the consequences for the workforce. Will employees lose their jobs? And, if so, how many jobs will be lost? An employer has plenty of freedom when it comes to reorganizing the business, especially in the case of a reorganization without dismissal or redundancies. With the so-called right to issue instructions, an employer obliges personnel to comply with ‘reasonable instructions’. Laying off employees in a reorganization or in the case of suspension of payment requires careful preparation and justification. For this, an overview of the entire current and future workforce and the associated organizational structure is essential within the step-by-step reorganization plan.
Reorganization redundancy plan
If a reorganization leads to the loss of jobs, employers and redundant employees have various options and obligations. For example, an employee whose position has become surplus to requirements within the organization can apply for a possible position in the downsized or reorganized business, start a reassignment process or be made redundant involuntarily. In the case of compulsory or collective redundancies, an employer must draw up a redundancy plan for the reorganization. This plan lays down the joint arrangements and provisions for the staff being kept on and the staff who are leaving. A redundancy plan as part of the step-by-step reorganization plan is not required by law. However, the company must inform the works council about the staff consequences of a reorganization.
When does a reorganization involve collective redundancy?
Collective or mass redundancy is deemed to exist if twenty or more jobs are lost at a company as part of a reorganization or within a period of three months. In this case, the Collective Redundancy (Notification) Act comes into effect. An employer is obliged to report this to the Employee Insurance Agency, trade unions and employees. In addition, the company must consult with trade unions or the works council about a redundancy plan in the event of reorganization. This step too must be fully described and detailed in the step-by-step reorganization plan.
Reorganizing is communicating
Reorganizing or restructuring a business is often as necessary as it is complicated. Proper communication is the key to ensure the reorganization progresses effectively. Based on this step-by-step reorganization plan, you can make the necessary preparations yourself and investigate whether a reorganization is likely to succeed or perhaps essential for your company. Is your business experiencing financial difficulties and are you interested in the possibilities for preventing bankruptcy? Our specialists in corporate law, employment law and bankruptcy law will be happy to advise and guide you. You can contact our insolvency lawyers now. You are not committed to anything.