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24
May
  • Posted By : Administrative
  • Category: General Tax Topic
  • Comments: 0

WHAT IS DEMERGER? WHAT ARE THE DIFFERENT WAYS OF DEMERGING?

Demerger is the strategy of splitting off a part of an existing company to become a new company. A demerging company operates completely separate from the original company. Shareholders of the original company are usually given an equivalent stake of ownership in the new company. A demerger is often done to help each of the segments operate more smoothly to focus on a more specific task.
Immediately after the demerger, shareholders have a direct 100% interest in each of Head Company and the demerged entity.

There are three ways to demerge that can be used alone or in combination:

  • The owners of the head entity are arrayed with the proprietorship benefits of the demerged entity;
  • The owners of the head entity are issued with the cancellation of proprietorship benefits and the release of new benefits in that entity;
  • The owners of the head entity and the entity itself are issued with adequate benefits in order to result in an effective transfer (often stated to as swamping).

 


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