Demerger in General

A demerger may in principle be considered as a reverse image of a merger [6.4.2 Merger]. A limited liability company (demerging company) may demerge so that the assets and liabilities of the demerging company are transferred in full or in part to one or several limited liability companies (acquiring company).

The shareholders of the demerging company receive shares in the acquiring company as demerger consideration. The demerger consideration may also consist of cash, other assets or commitments.

A demerger may take place in one of the following manners:

• all of the assets and liabilities of the demerging company are transferred to two or more acquiring companies, and the demerging company is dissolved (full demerger)

• part of the assets and liabilities of the demerging company are transferred to one or several acquiring companies (partial demerger)

Demerger into an existing company is a demerger where the acquiring company has been incorporated prior to implementation of the demerger. Demerger into a company to be incorporated, on the other hand, is a demerger where the acquiring company is incorporated in connection with the demerger. A demerger may also take place both into an existing company and into a company to be incorporated simultaneously.

The Limited Liability Companies Act includes specific provisions applicable to cross-border demergers between companies registered in two or more Member States of the European Economic Area, based on the European Union Cross-Border Merger Directive.

A demerger includes a number of issues, documentation and deadlines. A successful demerger requires often close cooperation between auditors and lawyers.