Split-off a company (demerge) in Austria
A demerger is a strategic business decision where a company chooses to transfer some or all of its commercial activities to another entity. This separation involves dividing the company’s operations into separate parts, either creating a new independent entity or selling off/dissolving the separated unit. The company that transfers its activities is called the demerged entity, while the recipient company is known as the resulting company.
Types of demergers
There are three main choices for separating a company in Austria, each with their own tax benefits.
Statutory demerger
A situation in which a new company is established and its shares are distributed 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 another company, which then offers 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
A different method of dividing a company is by reducing the share capital of the parent company. This entails decreasing the capital of the transferring company in conjunction with transferring a business operation to new shareholders or holding companies managed by them. A reduction of capital demerger can be advantageous 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
A company is closed down and its assets are moved to new entities through a liquidation demerger. The shareholders of the company being shut down receive shares in the new companies in exchange for their holdings during the closure process. In cases where shareholders have different opinions on the company’s future and wish to go in separate directions, a demerger may be chosen. This tactic enables each shareholder to determine their own path.
Benefits of demerging
Demergers are often driven by a desire to increase shareholder value. After a demerger, shareholders typically receive shares in the newly formed company. If the demerger is successful, profits and share prices for both resulting firms can increase as anticipated. One reason for potential profit growth is that separate management teams are responsible for their own successes and failures without interference from the main board. With clear accountability, there is greater motivation to meet financial goals. Additionally, individual management teams can focus on their respective areas of expertise. Demergers also allow new businesses to raise their own capital rather than relying on centrally allocated funds. In the event of a failed joint venture or acquisition, each party can cut their losses and continue operating independently.
Considerations before demerging a company
Conducting a comprehensive assessment of different factors is crucial for a successful demerger in Austria. This involves evaluating the company’s assets, liabilities, and operations, and 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 risks or disruptions. Overall, careful planning and consideration of these factors are necessary for a smooth demerger process in Austria.
Contact us
If your company in Austria is thinking about undergoing a demerger, our team is ready to help you through the entire process. Utilizing our knowledge of corporate law and business deals, we can offer personalized advice to help make the demerger process go smoothly and successfully. Whether you require help with adhering to legal regulations, conducting financial assessments, 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 you on your company’s demerger path.