Split-off a company (demerge) in Slovenia
A business may choose to go for a demerger as a strategic decision to shift some or all of its business activities to another entity. In essence, a demerger happens when a company splits its ongoing operations into distinct parts, forming a new standalone entity, or disposing of/dissolving the separated unit. The company moving its activities is called the demerged entity, while the acquiring company is termed the resulting company.
Types of demergers
In Slovenia, there are three main ways to demerge a company, each providing unique tax benefits.
Statutory demerger
A situation in which a new company is established and its shares are given 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 a different company, which then gives shares in the new company to the shareholders of the distributing 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
Another method of dividing a company is by reducing the share capital of the parent company. This allows for a transfer of a trading operation to new shareholders or holding companies controlled by those shareholders, with a corresponding decrease in the transferring company’s capital. This type of demerger through a reduction of capital can be beneficial.
- 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 distributed to new entities in a liquidation demerger, the shareholders of the original corporation receive shares in the new companies as compensation for their entitlements during the winding down process. If shareholders have differing opinions on the company’s future and wish to go in separate directions, a demerger may be a viable option. This strategic decision enables each shareholder to pursue their own path independently.
Benefits of demerging
Corporations often choose to demerge with the main goal of creating more value for their shareholders. This process typically involves issuing shares in the newly formed companies to existing shareholders. The profits and share prices of the resulting firms are expected to increase if the demerger brings the anticipated benefits. One reason for potential profit growth is that separate management teams are able to independently manage their gains and losses without interference from the main board. This increased accountability may also drive motivation to meet financial targets. Additionally, the division of management teams allows CEOs to focus on their specific areas of expertise. By demerging, each new business has the opportunity to raise its own capital instead of relying on centrally assigned budgets. Furthermore, in cases where a joint venture or acquisition does not go as planned, each party is able to minimize losses and continue running their own separate companies.
Considerations before demerging a company
In order to successfully carry out a demerger in Slovenia, it is crucial to carefully assess different aspects to guarantee a seamless transition. This involves examining the company’s assets, debts, and activities, as well as comprehending the necessary legal and regulatory obligations. It is also important to take into account the implications for stakeholders, including shareholders, workers, clients, and suppliers, in order to minimize any possible risks or interruptions. In essence, thorough planning and evaluation of these factors are vital for a smooth demerger process in Slovenia.
Contact us
If your company in Slovenia is thinking about a demerger, our team is available to support you throughout the entire process. Drawing on our knowledge of corporate law and business deals, we can offer personalized advice to help guarantee a seamless and prosperous demerger. Whether you require help with adhering to legal regulations, financial assessments, or communicating with stakeholders, we are dedicated to aiding you in accomplishing your objectives efficiently. Get in touch with us now to arrange a meeting and discover how we can assist your company through the demerger process.