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Demerging your business, or splitting off part of its assets or activities, can be an efficient way to unlock value for shareholders. Transferring assets from one entity to another – whether that’s shares or a business unit as a whole – can be beneficial especially when you’re operating in different sectors.
By restructuring or spinning off certain activities into a new entity, the original business and the spun-off business can potentially end up being worth more than the sum of the original parts. This is especially true if your business has radically changed over the years as it has grown and matured. Demergers can also be a useful way of protecting a business from takeover or to resolve disputes. Find out how we can help demerge your business and increase the value of your business units.
Our team can assist you across all areas of corporate law, including:
Our team of corporate solicitors can help your business by:
Understanding whether a demerger is right for your business
For example, if your activities are diverse and you feel that, by splitting up the business, each part can focus on its core activities, with separate balance sheets and revenue goals.
Showing you how a demerger can be structured to drive out the most value and/or achieve your goals for the demerger.
Advising you on the sale of part of your business if you want to fend off potentially hostile offers for your business and divest yourself of some of your assets.
Explaining the demerger options that are open to you and the tax consequences of each type.
Obtaining HMRC clearance for the demerger if applicable.
Registering your new business at Companies House.
Liaising with shareholders and investors during the demerger and showing them the benefits of the deal.
Drafting the necessary documents
Including the demerger agreement itself as well as shareholder resolutions, making sure everyone’s interests are protected as far as possible and balancing the risks and rewards.
What type of demerger you choose to implement depends on your company’s financial situation, tax issues, the factual and legal background to the deal, and the reasons you want to split off part of your business. We’ll help you navigate the choices available to you and come to a conclusion as to the best route for your business. We’ll work with you and your management team to answer detailed questions about your particular company and business dynamics, so together we can troubleshoot potential issues that could occur and that are particular to your situation, for example:
A statutory demerger is where you create a new company from part of your existing business to acquire the ‘demerged’ business and assets, and its shares are transferred to the original company’s owners. The transfer is either by way of a dividend or by creating a new subsidiary and moving this to a new holding company, with the shares being transferred to the original shareholders.
You can also demerge by reducing the share capital of the parent company and transferring a trading business to new shareholders or new holding companies as a repayment of capital.
In a liquidation demerger, you can begin the process of liquidating your business and transfer assets to new companies. Shares in the new companies are given to original shareholders as a result of the liquidation of the old company.
Often, when a business splits off part of its activities into a second company, shareholders will be given shares in the new company. These two sets of shares are often worth more in total than the shares of the original company, in effect unlocking more value, and each individual business after the demerger will have a clearer market profile.
Where your business affairs have become overly complex, with different parts of your activities cross-subsidising others, splitting them out can make each part function more efficiently as a stand-alone entity, potentially with more access to loans and capital.
Management can focus more keenly on specialist areas and manage the individual aspects of the business more productively.
What type of demerger you choose to implement depends on your company’s financial situation, tax issues, the factual and legal background to the deal, and the reasons you want to split off part of your business. We’ll help you navigate the choices available to you and come to a conclusion as to the best route for your business.We help large and small companies, groups, holding companies, directors, investors, and shareholders. We support a wide range of UK-based companies at various stages in their business development. If you feel that splitting off part of your business would help you realise additional value for shareholders, or you want to demerge in order to focus management attention on particular aspects of your activities, get in touch. It’s vital to take good legal advice at the appropriate stage of a demerger to avoid unexpected tax charges and ensure the demerger is carried out as quickly and efficiently as possible.
We can assist you with strategic analysis of your company and its structure and support you to demerge your activities. Our corporate solicitors have a wealth of experience in demergers and restructuring organisations. We are experienced in identifying your immediate needs and proactively working with you to troubleshoot potential issues, so the transaction is carried out as smoothly as possible.
Plus, we have all been recruited from top 100 UK law firms or from large international businesses and have advised clients both as external advisors and as in-house corporate counsel. Find out more about the team here:
Our three transparent pricing packages are designed to give you the widest possible access to high-quality legal advice, whatever the size and nature of your business:
Straightforward access to senior solicitors at a competitive rate.
An affordable solution for businesses needing one-off legal support. Receive ‘City’ partner-level expertise at a fraction of ‘City’ prices.
Have legal peace of mind for £189 per month with additional support from £125 per hour.
A monthly subscription legal support package specifically designed for start-ups and smaller businesses.
Providing you with priority access to a dedicated panel of highly experienced solicitors.
Fully account managed quarterly subscription service for businesses with more complex legal needs.
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Our commercial lawyers are based in or close to major cities across the UK, providing expert legal advice to clients both locally and nationally.
We mainly work remotely, so we can work with you wherever you are. But we can arrange face-to-face meeting at our offices or a location of your choosing.