Demergers

Drive out additional value from your company or group and protect valuable assets by demerging your business.

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.

Unlock hidden value in your business with a carefully considered demerger

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.
  • Liaising with shareholders and investors during the demerger and showing them the benefits of the deal.
  • Reviewing your company’s legal documents and management structure as well as your shareholdings and providing legal advice as to how it will change as a result of the demerger. For example, there may be considerations in relation to pension and employee share schemes or intellectual property.
  • 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.
  • Registering your new business at Companies House.

What our clients say

We pride ourselves on delivering an excellent service for clients, but don’t just take our word for it.

Smooth the way to greater shareholder returns with holistic legal support

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:

  • Do you have assets like intellectual property or software that is used by the business as a whole, and that could be affected if the group were to be split up? How will these be handled, and will you ask for payment or license fees for use of IPR?
  • What will happen to goodwill?
  • Will your existing suppliers be prepared to deal with the new business? Will any consents be required, for example from landlords?
  • How about business loans and other liabilities? Will these be transferred?
  • Do you have distributable reserves available?
  • What will happen to employees when the company splits?

Types of demerger to consider

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.

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.

How a demerger will benefit your business

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.

Who 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.

Why choose Harper James Solicitors?

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:

Pricing plans

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:

City

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.

Enterprise

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.

On-Demand

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.

What next?

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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.

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