This paper focuses on the behaviour of variable structure systems with dynamic control, particularly during the reaching mode of operation. It is shown that stability problems may arise during this reaching phase. The causes of these problems are closely related with the problems of windup commonly found in conventional control systems with actuator constraints. Methods for stabilization of the reaching mode are proposed which are based on the concepts of 'realizable reference' and observers. Well-known algorithms that have been previously proposed from empiric ideas, can now be rigorously derived using these concepts. The theoretical framework developed by Kothare and co-workers in the context of windup is generalized to study and design control algorithms for the reaching mode.