Split-off a company (demerge) in Kosovo
It is possible for a company to choose to undergo a demerger as a strategic business decision in order to shift some or all of its business operations to a different entity. Essentially, a demerger occurs when a company splits its current operations into distinct parts, forming a new independent entity, or selling/dissolving the separated unit. The company that is transferring its operations is called the demerged entity, while the company receiving the operations is known as the resulting company.
Types of demergers
There are three main choices for separating a company in Kosovo, each with its own tax benefits.
Statutory demerger
The creation of a new company and the transfer of shares to the parent company’s shareholders is known as a “statutory demerger.” In a “three-cornered” demerger, the parent company transfers the new subsidiary to another company, which then issues 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 a dividend to its shareholders on the new shares.
Share capital reduction demerger
An alternative method of separating a firm involves reducing the parent company’s share capital, along with a corresponding decrease in the transferring company’s capital. This allows a trading operation to be transferred to new shareholders or holding companies owned by those shareholders. A capital reduction demerger could 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 moved to new entities in a liquidation demerger. The shareholders of the original company receive shares in the new businesses as part of the winding up process. If shareholders disagree on the company’s future direction and want to go their separate ways, a demerger may be the solution. This allows each shareholder to pursue their own path independently.
Benefits of demerging
One major reason why corporations choose to demerge is to increase value for their shareholders. After a demerger, the new company often issues shares to the shareholders. If the demerger brings the expected benefits, profits and share prices for both resulting companies will likely increase. This increase in profits may be due to the fact that individual management teams are responsible for their own successes and failures without interference from the main board. With clearer accountability for results, these teams may be more motivated to achieve financial targets. Additionally, dividing management teams allows CEOs to concentrate on their specific strengths. Demerging also gives each new business the ability to raise its own capital rather than relying on predetermined budgets. An advantage of a demerger in a situation where a joint venture or acquisition fails is that each partner can minimize losses and continue to operate their own separate company.
Considerations before demerging a company
In order to carry out a demerger in Kosovo successfully, it is necessary to carefully evaluate a range of factors. This involves examining the company’s assets, liabilities, and operations, as well as comprehending the legal and regulatory obligations. It is also important to consider the effects on stakeholders, like shareholders, employees, customers, and suppliers, in order to minimize any potential risks or disturbances. In conclusion, thorough planning and taking these factors into account are crucial for a smooth demerger process in Kosovo.
Contact us
If you are thinking about separating your company in Kosovo, we can help you throughout the entire process. Our team specializes in corporate law and business deals, offering personalized advice to guarantee a seamless and prosperous demerger. Whether you require support with following legal regulations, financial evaluations, or communicating with stakeholders, we are dedicated to aiding you in reaching your objectives efficiently. Get in touch with us now to arrange a meeting and discover how we can assist with your company’s demerger process.