The term ‘Demerger’ simply means one company transferring one or more of its business operations into another company(s). The company that transfers such business operation is known as the “demerged” company, while the company to which the business is transferred is known as the “resulting” company. Demerger is an opposite of merger a statutory disintegration or separation of two or more companies by the transfer of the properties to one surviving company.
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Types
of Demerger |
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1.Spin-off:- This type of demerger involves division of
company into wholly owned subsidiary of parent company by distribution of all
its shares of subsidiary company on pro rata basis. By this way, both the
companies i.e. holding as well as subsidiary company exist and carry on
business. 2.Split-Up:- This type of demerger involves the division
of parent company into two or more separate e companies where parent company
cease to exist after the demerger. 3.Equity Carve Out:- This is similar to spin offs, except the
same part of shareholding of this subsidiary company is offered to public
through a public issue and parent company continues to enjoy control over the
subsidiary company by holding controlling interest in it. 4.Divestitures:- These are sale of segment of a company for
cash or for securities to an outside party. |