Split-off a company (demerge) in North Macedonia
A company might choose to undergo a demerger as a strategic decision to shift some or all of its business operations to another entity. In essence, a demerger takes place when a company splits its ongoing operations into distinct parts, forming a new standalone entity, or disposing of/disbanding the separated division. The company moving its operations is called the demerged entity, while the receiving company is called the resulting company.
Types of demergers
There are three main options for demerging a company in North Macedonia, each with its own tax-efficient benefits.
Statutory demerger
When a new company is created and 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 issues shares in the new company to the shareholders of the parent company in exchange for the distribution. Alternatively, the parent company may give a direct dividend to its shareholders on the new shares.
Share capital reduction demerger
One alternative method of separating a company is by reducing the parent company’s share capital. This involves decreasing the capital of the transferring company as well, transferring a trading operation to new shareholders or holding companies controlled by those shareholders. A capital reduction demerger can be beneficial in this scenario.
- 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
In a liquidation demerger, a company is dissolved and its assets are passed on to new entities. Shareholders of the dissolved company receive shares in the new companies in exchange for their interests during the winding up process. When shareholders have differing opinions on the company’s future and wish to go their separate ways, a demerger can be a strategic option. This allows each shareholder to pursue their own path independently.
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 proves to be advantageous as expected, profits and share prices of both resulting companies are likely to increase. This increase in profits can be attributed to the fact that separate management teams are now accountable for their own gains and losses without interference from the main board. Additionally, the clarity of accountability for each team may further motivate them to achieve financial targets. Furthermore, a demerger allows CEOs to focus on their specific brand or area of expertise. Each new business created through a demerger is able to raise its own capital instead of relying on centralized budgets. Another advantage of a demerger is that in the event of a joint venture or acquisition not being successful, each partner has the ability to cut their losses and continue operating independently.
Considerations before demerging a company
In order to successfully carry out a demerger in North Macedonia, it is important to carefully assess different factors to guarantee a seamless transition. This involves examining the company’s assets, liabilities, and operations, as well as being aware of the legal and regulatory obligations. It is also vital to take into account the interests of stakeholders, including shareholders, employees, customers, and suppliers, in order to prevent any possible risks or disturbances. In conclusion, thorough preparation and consideration of these elements are necessary for a prosperous demerger procedure in North Macedonia.
Contact us
If you are thinking about demerging your company in North Macedonia, our team is ready to help you through the entire process. With our knowledge of corporate law and business dealings, we can offer personalized advice to guarantee a seamless and prosperous demerger. Whether you require help with following legal regulations, analyzing finances, or communicating with stakeholders, we are dedicated to aiding you in reaching your objectives efficiently. Reach out to us now to set up a meeting and discover how we can assist your company with its demerger.