Demerger

A demerger is a restructuring in which the assets and liabilities of a company are divided into two or more parts in order to transfer them to (new or existing) companies. The WVV recognises three forms of demerger: the demerger by acquisition, the demerger by incorporation and the mixed demerger.

Demerger by acquisition

A demerger by acquisition is a legal act whereby the entire property of a company, both the rights and the obligations, is transferred to several companies as a result of its dissolution without liquidation, in exchange for the issue to the partners or shareholders of the dissolved company of shares in the acquiring companies which share in the demerged property, possibly with a cash payment not exceeding one tenth of the nominal value or, in the absence of a nominal value, of the fractional value of the shares issued.

Demerger by incorporation

The second form is the demerger by incorporation of new companies, by which all the assets and liabilities of a company are transferred, without liquidation, to several new companies created by it following a dissolution without liquidation, in

exchange for the issue to the shareholders or members of the company being divided of shares in the recipient companies, possibly with a cash payment not exceeding one-fifth of the nominal value or, in the absence of a nominal value, of the accounting par value of the shares issued.

Mixed demerger

The last form of demerger is the mixed demerger. This is the legal act whereby the entire property of a company, both the rights and the obligations, is transferred as a result of dissolution without liquidation to one or more existing companies and to one or more companies incorporated by it in exchange for the issue to the partners or shareholders of the dissolved company of shares in the acquiring companies and, if applicable, with a cash payment not exceeding one-fifth of the nominal value, or, in the absence of a nominal value, of the accounting par value of the shares issued.

The consequences for the transferring company are always the same in each of the three forms:

• the demerger shall automatically result in the dissolution of the company being demerged. It is dissolved without liquidation;

• the shareholders of the demerged company become shareholders of the acquiring companies. This is done on the basis of the distribution stated in the demerger proposal;
• as a consequence of the demerger, all the assets and liabilities of the demerged company are transferred to the acquiring companies.

The difference between the three forms is to be found with the acquiring companies. Various motives can underlie a demerger, such as:

• the sharing of risks;
• allowing new investors to enter a certain part of the company or;
• preparing a sale of part of the company.