Mahmood Hussain Advocates & Legal Consultancy | View firm profile
The word “Restructuring” is the most spoken phrase in the corporate lifetimes and arguably the least understood by the company’s management. As restructuring in many of these entities is not connected with the future planning of the organization but it is in many cases has been associated with the action to be taken after the fall. Simply the “Restructuring” for many of us is the action taken after the collapse of the wall!!!
Thus, “Restructuring” as a technical platform for action plan related or connected with the strategic planning of a company is not taking as a priority in many companies. This is true regardless of the companies’ size and area of focus. This is also true whether the vision or the strategic objectives are for the reasons for promoting the company’s ability to sustain, grow or compete in small, medium or large market.
In this worldwide pandemic and panic caused by COVID19 it is essential for companies to take measures of corporate Restructuring more seriously. The business outcome of this worldwide panic has its severe effect on all business spectrums whether you are a supplier or receiver of a products or services. This historical moment will define the immunity and ability of those will survive this hardship and those will fall. Failure to act or to take a timely measure will result in possible lost of your market position or lost of your highly trained personnel.
The problem of using the word ‘Restructuring” is always a companied by financial or operational hardship as we found that in the definition under the “Investopedia”, which is a wide used resource.
“Restructuring is an action taken by a company to significantly modify the financial and operational aspects of the company, usually when the business is facing financial pressures. Restructuring is a type of corporate action taken that involves significantly modifying the debt, operations or structure of a company as a way of limiting financial harm and improving the business”.
However, the essence of the Restructuring is arguably accompanied with ability of future projection and the ability to take an active action rather than reactive measure. In these specific situations your assets whether in human or physical assets are your voyage to the stability and failure to re-allocate your assets will be the fatal course of the company’s future economic hardship.
We have to understand that the shifting in the business models and the business plans theories are normally born from the big bangs and new jobs are created and jobs will disappear. In many cases we may find that the delayed measures as technology development are forced to take place and therefore may result in the redundancy of some services or jobs connected therein.
For example, we may learn that in the education and knowledge services building and investments in more technology infrastructure is much important than investing in the physical books printing, large spaces for rent or even to shorten the physical school timing and having a combination of distance learning and class interaction or the full online institutions. This is just a hypothetical situation but today we are in a better position to suggest this hypothetical may become the reality in very coming future for all education and knowledge-based services.
With this example we need to understand that the Restructuring in this scenario will be essential for the Education and Knowledge Group companies such as schools, training centers and institutions that may have different entities and subsidiaries that are initiated or structured to serve different business platforms. This also could be true to the hotel management, manufactures and others driven by technology. For example, we have noticed that these groups have adopted a mechanism of separating entities that supply logistics, human power and those of operational base to limit the legal risks. This legal tool was used by lawyers for many years. But this tool may not be practical in coming future with the full integration of the technology in the day to day operation. The business and technology convergence are not a technical word anymore. The world is really beyond the convergence and the technology became the only survival tool of tomorrow.
Other areas of the basic Restructuring needs are connected with the re-engineer the organization policies and the corporate governance as the decision-making mechanism to avoid liabilities we may require us to structure companies in order to protect those who make the final decisions on the subsidiary level or to the affiliates.
COVID 19 and the renaissance of Restructuring
We have a say in the Arabic literature which means that the “Fortunate is born from the unfortunate womb”. This true as COVID 19 is unfortunate pandemic which may destroy many of human life’s and businesses alike but also its an eye opener to our true capabilities as companies to handle our cashflows, usage of our resources and the policies, processes and measures. Thus, the basis of the Restructuring is assuring that COVID 19 is a real-life unplanned exercise of our readiness not to deal with yesterday but to prepare for tomorrow.
We may test the recent Ministerial Resolution No. (279) issued by the Ministry of Human Resources & Emiratization of the UAE specifically as the sparkle of this change that may be today is dealt only as precaution measure, but it may be the source of longtime restructuring measure. In this we have to be clear that the aforementioned Resolution is issued to deal with the immediate situation and not to be considered an amendment to the UAE Federal Employment Law 2018. Therefore, this article is only using this particular Resolution to emphasize the fact that even governments when they issue such temporary measures, they do also put in the consideration the importance of business stabilization for long time. Thus, Restructuring is essential to achieve short- and long-term strategic objectives.
The aforementioned resolution in its Article 2 which states:
Establishments Effected by such Precautionary measures and wishes to reorganize their work shall progressively proceed with their actions, in agreement with the non-national workers as follows:
1- Implemented remote working system,
2- Grant paid leave,
3- Grant unpaid leave,
4- Temporary salary reduction during the referenced period,
5- Permanent salary reduction
And Article (3) of the Resolution which permits the Establishments to register its surplus of its employees in the Virtual Labor Market operated by the Ministry
In this article I will just focus in the phrase “reorganize” under Clause 2 and Surplus under Clause 3 of the said resolution, which are novel measures announced by the Ministry. Even though the Resolution is announced as an interim measure to curb the effects of the pandemic on the business, we may find that the business in UAE have been given an opportunity to restructure and to think beyond this short window of time connected with COVID19 which we all hope that this pandemic will end very soon. But what we are able to learn from this hardship is much worth thinking for the future of our companies and the ability that we need to embedded in our corporate thinking to be more creative in business models, corporate structure and the most important how to remain in the game.
Let us have this unfortunate pandemic a chance to review our path for tomorrow let us Restructure our businesses to come out of this uncertainty moments to certainty future.
Written by: Mr. Hafidh Thani – Managing Partner