The successful growth of a company will necessarily involve its adaptation to the market and its demands. That is why a company cannot remain unchanged as time passes. This is all the more relevant at the present time, when commercial strategies change constantly.
To stay ahead and be able to cope with these situations, the shareholders and directors of these companies carry out a variety of operations. Among the best known are demergers and mergers of companies. If you would like to know more about these procedures, do not hesitate to contact BBMabogados.
What is a demerger?
It is a corporate operation by which a company divides or splits its assets (the demerged company). These portions become part of another company, whether new or pre-existing (the recipient company/companies), without any liquidation taking place.
In exchange, the latter give the shareholders or the company shares in proportion to the contribution.
Types of demerger
The demerger of a commercial company may fall within one of the following scenarios:
TOTAL DEMERGER
This type of demerger involves the dissolution of the demerged company, since the whole of its assets is divided into two or more parts. These are transferred as a block to a new company or are absorbed by an already existing company.
In this respect, the shareholders receive from the recipient companies as many shares as the proportion of their holding in the company being dissolved.
PARTIAL DEMERGER
In this case, it is the transfer as a block of one or several portions of a company’s assets, which must form an economic unit, to one or several new or already existing companies.
Likewise, the shareholders will receive shares from the recipient companies, in proportion to their holding in the demerged company, while the latter reduces its share capital by as much as has been split off and, unlike the total demerger, the company is not dissolved.
HIVE-DOWN (SEGREGACIÓN)
It is the transfer as a block of one or several parts of a company’s assets, which form a branch or line of economic activity, to one or several companies.
The difference here lies in the fact that the party who receives shares from the recipient companies is the hived-down company, not the shareholders; therefore, there is no dissolution of the company. However, unlike the partial demerger, the company may hive down the whole of its assets.
In any case, the demerger may be agreed provided the shareholders’ contributions to the demerged company are paid up in full.
What is a merger?
Another of the quintessential corporate operations is the merger, which is carried out between two or more companies, materialising in the total transfer of the assets of one or several companies to a recipient entity.
That is, shareholders and assets are integrated into a single company, which may be pre-existing or new. In this way, the dissolution of all or some of the merged companies may take shape.
Types of merger
A merger can be of two types, which are purely formal but whose impact is immaterial:
MERGER BY CREATION OF A NEW COMPANY
This leads to the dissolution of the companies that merge. In this way, the transfer of the corporate assets to the new company means that it becomes the new holder of their rights and obligations.
MERGER BY ABSORPTION
In this case, a pre-existing company acquires the assets of the absorbed companies. The latter will be dissolved, while the former sees an increase in its share capital in the corresponding proportion.
Differences between demerger and merger of commercial companies in Santander
Let us look at the most notable differences:
– A demerger involves the splitting of a company’s assets into several parts, which results in a reduction of the share capital. A merger, on the other hand, involves the combination of several sets of assets.
– With a demerger there is the possibility of a partial transfer of the assets, so the demerged company is not necessarily dissolved. A merger, meanwhile, requires the total transfer of the merged company’s assets, which means it is always dissolved.
Stages of the demerger and merger of commercial companies in Santander
The procedure for these operations can be quite similar. In any case, it is advisable to have the advice of solicitors who are experts in the matter. They will help you achieve a successful demerger or merger process, since these are operations that can become quite complex, depending on the particular circumstances of each company and its shareholders.
In any event and, in very general terms, the steps that make up these processes are:
✅ Demerger and merger projects. Where the terms, timescales and scope of the procedure are set out.
✅ Directors’ and experts’ reports.
✅ Resolution.
✅ Deed, which is executed before the Commercial Registry and then given publicity in the Official Gazette of the Commercial Registry.
In any case, do not hesitate to contact BBMabogados if you are planning or carrying out a procedure of this nature.
SOLICITORS WHO EMPATHISE WITH THEIR CLIENTS IN DIFFICULT MOMENTS
We protect our clients’ rights with the utmost dedication and diligence, placing special emphasis on personal service
