Some companies expand their activities, branches and investments while their legal and administrative arrangements remain as they were at the outset, and this growth can cause authority to overlap, assets and contracts to become spread across several entities and decision-making to become more complex.
Structuring begins with understanding how the business operates, its sources of revenue and its obligations, followed by defining the relationship between ownership, management and operations, including which entity owns an asset, which entity enters into a contract, who bears an expense and who has the authority to approve a commitment.
When a group has commercial, industrial and real estate activities, the relationship between those activities warrants a separate assessment covering whether they should be brought together in one entity or distributed among companies, how shared services should be provided and funded and the implications for existing contracts, licences and rights.
The structure is completed through suitable constitutional documents, clear arrangements governing relationships between partners, workable approval powers and reports that enable management to monitor each activity.
The importance of structuring lies in enabling the company to expand through clear decisions, allocate responsibilities, manage risks and prepare its business for a new investor, a transfer of ownership or the development of funding sources.
