Restructuring of a company as a solution to the economic slowdown following the COVID-19 crisis

Do you know how to successfully plan and implement a company's restructuring?

The impact of the measures taken to prevent the spread of COVID-19 has led to a significant economic slowdown. The situation has the potential to cause a growing number of problems that may jeopardise the health of businesses. One of the possible solutions that companies may resort to is restructuring.

However, companies must be exceptionally cautious about the decisions they make during these times: overlooking deficiencies in the company’s management, imprudent steps in the business or investment strategies, limited access to the necessary funding, underestimating changes in legislation, and many other issues may easily thrust a company into an existential crisis.

Restructuring and the life cycle of a company

The key to a successful restructuring process is the quick identification of problematic issues. Only once this has been done, a company can start looking for the suitable measures that will immediately stabilise its operation, and enable a comprehensive recovery following the COVID-19 crisis.

The process takes place within a company’s whole life cycle; however, companies must focus on different risks and challenges in the individual phases of the restructuring.


The company can begin implementing turnaround measures already at the first signs of stagnation. The timely identification of the causes of the situation makes it possible to implement quickly suitable corrective measures. Addressing problems at this phase of the company’s life cycle offers the widest scale of possibilities to turn away a potential crisis.

Capital structure optimisation

A high rate of indebtedness or an inadequate financing structure may present obstacles for implementing a turnaround. Divestments of non-operational assets, loan refinancing or “additional collateralisation” of assets may take significant weight off the company’s expenses and turn away the looming inability of the company to settle its loans.

Financial restructuring

Companies dealing with a strenuous situation often face the imminent danger of not being able to continue operating due to insufficient liquidity. Rationalisation of the product portfolio, identification of internal sources and other operational measures can lead to an improvement, but these steps are often just the necessary basis for a more comprehensive solution. Financial restructuring may include refinancing debts, a temporary suspension of repayments, postponing their due dates, a partial write-off or the entry of an equity partner.

Contingency plans

The increased risk rate that comes with restructuring occurs, among other things, because some of the parties involved may be against the proposed solution. It is therefore very important, especially in the more advanced phases of the crisis, to simultaneously work with an alternative plan – a contingency plan. If it is not possible to agree on the preferred solution, the company should be prepared to react and proceed in line with the alternative scenario (insolvency is also one of the options).


If the company and its creditors are not able to agree on an out-of-court settlement or the company is facing the danger of insolvency, there is still room for restructuring within the insolvency proceedings. If the company is viable and it is the interest of all parties involved to continue its operation, the insolvency solution must be carefully considered and its implementation must be planned before any irreversible steps are taken. In the case of insolvency, the company may be facing additional risks related to the actual process, or risks that are specific for its line of business – these must be taken care of.

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