Split-off a company (demerge) in Belarus
One strategic business decision a company can make is to undergo a demerger, in which some or all of its commercial activities are moved to another entity. This process involves dividing the company’s operations into separate parts to create a new independent entity or selling/dissolving the split unit. The company transferring its activities is called the demerged entity, while the receiving company is referred to as the resulting company.
Types of demergers
There are three main choices for demerging a company in Belarus, each with its own tax advantages.
Statutory demerger
When a new company is created and its shares are given to the shareholders of the parent company, it is known as a “statutory demerger.” In a “three-cornered” demerger, the parent company transfers the new subsidiary to another company, which then gives shares of 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
An alternative method for separating a company is by reducing the share capital of the parent company. This involves decreasing the capital of the company being transferred, and then transferring the trading operation to new shareholders or holding companies controlled by those shareholders. A demerger through capital reduction can be beneficial in this situation.
- 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 liquidated, its assets are distributed to new entities in a liquidation demerger. Shareholders of the original company receive shares in the new entities in exchange for their interests during the winding up process. In cases where shareholders have different opinions on the company’s future and want to go in separate directions, a demerger may be a viable option. This strategic decision enables each shareholder to follow their own path autonomously.
Benefits of demerging
One of the primary reasons why corporations choose to demerge is to create more value for shareholders. After a demerger, the newly formed company typically issues shares to its shareholders. If the demerger results in the expected advantages, profits and share prices may increase for both resulting firms. When separate management teams are in charge of their own gains and losses without interference from the main board, profits may see a boost. This increased clarity on each team’s accountability can enhance motivation to meet financial goals. Additionally, dividing management teams may allow CEOs to concentrate on their particular expertise. Demerging also enables each new business to raise its capital independently rather than relying on centrally assigned funds. A significant advantage of demerging is the ability for each partner to cut losses and focus on running their individual companies in case a joint venture or purchase does not work out.
Considerations before demerging a company
In order to successfully carry out a demerger in Belarus, it is crucial to thoroughly assess a variety of factors to ensure a smooth transition. This evaluation should involve examining the company’s assets, liabilities, and operations, as well as understanding the legal and regulatory requirements. It is also important to consider the impact on stakeholders, including shareholders, employees, customers, and suppliers, in order to minimize any risks or disruptions. Ultimately, careful planning and consideration of these factors are necessary for a successful demerger process in Belarus.
Contact us
If you are thinking about a demerger for your company in Belarus, our team is available to help you through the entire process. Drawing on our knowledge of corporate law and business deals, we can offer personalized advice to guarantee a seamless and prosperous demerger procedure. Whether you require support with adhering to legal regulations, evaluating finances, or communicating with stakeholders, we are dedicated to aiding you in reaching your objectives efficiently. Get in touch with us now to set up a meeting and discover how we can assist your company’s demerger process.