Features Of Business Reorganisation


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Features Of Business Reorganisation

(1) Process of re-setting: Reorganisation means re-arrangement, adjustment or readjustment as per the need of the situation. It is a process of re-setting (changing the existing setup) the affairs of an enterprise as per the need of business situation. It aims at bringing adaptability in an enterprise. Such reorganisation is inevitable due to flexible nature of environment. It is the price for survival, stability and prosperity of a business unit.

 

(2) Comprehensive term: Reorganisation is a comprehensive term and all alterations made in the organisation can be included within its scope. Such reorganization is essential for the adjustment with the realities. Meeting the challenge of change is the primary responsibility management and can be fulfilled through reorganisation.

 

(3) Lengthy process: Business reorganisation is a lengthy; time consuming, responsible and also a costly activity process.

 

(4) Necessary for solving problems/difficulties: Reorganisation of an enterprise is usually introduced when it faces serious financial, technical or marketing problems. Secondly, reorganisation is required when the business unit is not in a position to operate as a viable unit. Thirdly, reorganisation of a sick business unit will be necessary in order to strengthen it or in order to make it a viable unit. Fourthly, reorganisation may also be necessary due to other reasons such as change in environment, deficiency in the existing organisation and finally for avoiding developing inertia or inflexibility. In brief, reorganisation is necessary in the case of all enterprises in the course of time due to variety of reasons.

 

(5) Wide coverage: Reorganisation involves financial, technical, marketing or managerial restructuring of a business enterprise. In fact, it is a comprehensive exercise and includes the use of different techniques.

 

(6) Different methods used: Reorganisation is possible through different methods such as modernization, expansion, diversification, merger, takeover and amalgamation. Even restructuring and turnaround techniques are within its scope.

 

(7) Responsibility of management: Reorganisation of an enterprise is the responsibility of the top-level management. It has to prepare plan for reorganisation with the help of experts and execute it in a phased manner with the co­operation and support of managers and employees.

 

(8) Benefits available: Reorganisation, when introduced successfully, gives benefits to the enterprise, its consumers, employees and the owners also.

 

(9) Legal measure: Reorganisation is a legal measure. Reorganisation, in the financial sense, is a legally formalized process, which involves recasting of the capital structure because of an actual or imminent default on an obligation. Under Section 391 of Indian Companies Act, 1956, a company can reorganize itself by compromise. Here, the plan of reorganisation is prepared by the shareholders or creditors or both.


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