Split-off a company (demerge) in Turkey
A company may choose to undergo a demerger as a strategic decision to shift some or all of its business operations to a different entity. In essence, a demerger happens when a company splits its current operations into distinct parts, forming a new independent entity, or either selling off or dissolving the separated unit. The company transferring its operations is called the demerged entity, while the receiving company is known as the resulting company.
Types of demergers
There are three main choices for dividing a company in Turkey, each with its own tax benefits.
Statutory demerger
A situation in which a new company is established and shares are given to the parent company’s shareholders is known as a “statutory demerger.” In a “three-cornered” demerger, the parent company transfers the new subsidiary to a different company, which then offers shares in the newco to the shareholders of the distributing company in return for the distribution. Another option is for the parent company to directly pay a dividend to its shareholders on the new shares.
Share capital reduction demerger
An alternative method to divide a company is by reducing the share capital of the parent company. This involves decreasing the capital of the transferring company simultaneously, allowing for the transfer of business operations to new shareholders or holding companies owned 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
When a company is liquidated, its assets are moved to new entities through a liquidation demerger. The shareholders of the original company will receive shares in the new businesses instead of their rights during the winding up process. A demerger is an option when shareholders have different opinions on the company’s future and want to go in separate directions. This allows each member to make their own decisions independently.
Benefits of demerging
One of the main reasons corporations choose to demerge is to create more value for shareholders. After a demerger, the newly formed company often issues shares to its shareholders. If the demerger leads to the expected advantages, profits and share prices for both resulting firms will likely increase. This is because separate management teams will take control of their own gains and losses without interference from the main board. With each team clear on their accountability for results, there is more incentive to achieve financial targets. Splitting management teams also allows CEOs to concentrate on their specific brand or area of expertise. Demerging enables each new business to raise its own capital rather than depending on centrally allocated budgets. In case a joint venture or acquisition fails, each partner can cut their losses and continue operating their independent company.
Considerations before demerging a company
In Turkey, it is important to carefully assess a variety of factors before moving forward with a demerger to guarantee a seamless and prosperous transition. This involves examining the company’s assets, liabilities, and operations, and having a grasp of the legal and regulatory obligations. It is also vital to take into account the effects on stakeholders, including shareholders, employees, customers, and suppliers, in order to minimize any possible risks or interruptions. In summary, thorough planning and consideration of these elements are crucial for a successful demerger in Turkey.
Contact us
If you are thinking about splitting your company in Turkey, our team is available to support you throughout the entire process. With our knowledge of corporate law and business deals, 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 assisting you in reaching your objectives efficiently. Get in touch with us now to arrange a meeting and discover how we can aid your company in its demerger process.