Split-off a company (demerge) in Slovakia
One strategic business decision a company can make is to undergo a demerger, transferring some or all of its commercial activities to another entity. This involves splitting the company’s operations into separate parts to either form a new independent entity or to sell off/dissolve the separated unit. The company transferring its activities is called the demerged entity, while the recipient company is referred to as the resulting company.
Types of demergers
There are three main choices for undertaking a company demerger in Slovakia, with each option providing its own tax-efficient benefits.
Statutory demerger
A situation in which a new company is established and shares are distributed to the shareholders of the parent company is known as a “statutory demerger.” In a “three-cornered” demerger, the parent company transfers the new subsidiary to another company, which then issues shares in the new company to the shareholders of the parent company in exchange for the distribution. Another option is for the parent company to directly pay dividends to its shareholders on the new shares.
Share capital reduction demerger
One alternative method to separate a company is by reducing the share capital of the parent company. This involves decreasing the capital of the entity being transferred, allowing for the transfer of the business operations to new shareholders or holding companies under their control. This type of capital reduction demerger can be beneficial in certain situations.
- When a statutory demerger or liquidation demerger isn’t an option
- There are non-member state parties
- The entities aren’t trading companies
- None of the enterprises in the mix should be liquidated
- You intend to sell some group members or float them
- The distributing firm does not have sufficient distributable reserves
Liquidation demerger
When a company is dissolved and its assets are moved to different entities in a liquidation demerger, the shareholders of the original company receive shares in the new companies as part of the process of winding up. If shareholders have different opinions about the company’s future and want to go in separate directions, a demerger can be a suitable option. This strategic decision enables each shareholder to pursue their own path independently.
Benefits of demerging
One of the primary reasons that corporations choose to demerge is to increase shareholder value. After a demerger, new company shares are typically distributed to shareholders. If the demerger results in expected benefits, profits and share prices for both resulting companies are likely to increase. Separate management teams taking control of their own gains and losses independently can contribute to the rise in profits. Additionally, clear accountability for outcomes can motivate teams to meet financial targets. Dividing management teams allows CEOs to focus on their specific expertise, and each new business can raise its own capital rather than depending on centralized budgets. In the event of a failed joint venture or acquisition, a demerger allows each partner to cut their losses and continue running their own separate company.
Considerations before demerging a company
In Slovakia, it is crucial to thoroughly assess a variety of factors before moving forward with a demerger in order to guarantee a seamless and successful transition. This evaluation should involve examining the company’s assets, liabilities, and operations, as well as grasping the legal and regulatory obligations. It is also important to take into account the effects on stakeholders, such as shareholders, employees, customers, and suppliers, in order to minimize any possible risks or interruptions. In general, careful planning and consideration of these elements are necessary for a fruitful demerger process in Slovakia.
Contact us
If you are thinking about splitting your company in Slovakia, our team is available to help you through the entire process. With our knowledge of corporate law and business deals, we can offer personalized advice to make sure the demerger goes smoothly and successfully. Whether you require help with following legal rules, analyzing finances, or communicating with stakeholders, we are dedicated to assisting you in reaching your objectives efficiently. Get in touch with us now to set up a meeting and discover how we can aid your company in its demerger process.