Split-off a company (demerge) in Poland
A company might choose to undergo a demerger as a strategic business decision to shift some or all of its business activities to a different entity. Essentially, a demerger happens when a company splits its current operations into distinct parts, forming a new independent entity, or disposing of/dissolving the split unit. The company moving 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 splitting a company in Poland, each providing unique tax benefits.
Statutory demerger
When a new company is created and shares are given to the parent company’s shareholders, it is known as a “statutory demerger.” If the parent company transfers the new subsidiary to another company in a “three-cornered” demerger, the distributing company’s shareholders receive shares in the new company in exchange for the distribution. Alternatively, the parent company may choose to directly pay dividends to its shareholders on the new shares.
Share capital reduction demerger
One alternative method for dividing a company is by reducing the parent company’s share capital. This involves decreasing the capital of the company being split off, and transferring a trading operation to new shareholders or holding companies owned by those shareholders. A demerger involving a reduction of capital can be advantageous.
- 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 goes through a liquidation demerger, its assets are transferred to new entities and the original shareholders receive shares in the new businesses instead of their rights in the winding up process. If shareholders have different opinions on the company’s future and want to pursue different paths, a demerger can be seen as a strategic option that allows each shareholder to independently determine their direction.
Benefits of demerging
One of the main reasons why companies choose to demerge is to create more value for their shareholders. After a demerger, the new company often issues shares to the shareholders. If the demerger results in the expected benefits, profits and share prices of the two new companies will increase. This increase in profits can be attributed to the fact that separate management teams are now responsible for their own successes and failures without interference from the main board. This clarity on accountability can also lead to increased motivation to meet financial goals. Additionally, by dividing management teams, CEOs can focus on their specific areas of expertise. Demerging allows each new business to raise capital independently rather than depending on centrally allocated funds. In cases where joint ventures or acquisitions do not work out, each partner can minimize losses and continue running their own separate businesses.
Considerations before demerging a company
In order to successfully carry out a demerger in Poland, it is crucial to conduct a comprehensive assessment of different factors. This involves examining the company’s assets, liabilities, and activities, while also being aware of the legal and regulatory obligations. It is important to take into account the effects on stakeholders – including shareholders, employees, customers, and suppliers – in order to minimize any possible risks or interruptions. Ultimately, careful planning and consideration of these factors are key to a successful demerger in Poland.
Contact us
If you are thinking about a demerger for your Polish company, our team is available to help you through the entire process. We have extensive knowledge in corporate law and business deals, and we can offer personalized advice to ensure a seamless and successful demerger. Whether you require help with following legal regulations, financial evaluations, or communicating with stakeholders, we are dedicated to aiding you in achieving 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.