Split-off a company (demerge) in Croatia
A company may choose to undergo a demerger as a strategic maneuver to shift its commercial operations to another entity. This process involves dividing the company’s ongoing activities into distinct parts, which can result in the creation of a new independent entity or the sale/dissolution of the separated unit. The company that transfers its activities is called the demerged entity, while the company that receives the activities is known as the resulting company.
Types of demergers
There are three main choices for separating a company in Croatia, each with its own tax benefits.
Statutory demerger
When a new company is established and shares are given to the shareholders of the parent company, it 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 new company to the shareholders of the distributing company in return for the distribution. Another option is for the parent company to directly pay dividends to its shareholders on the new shares.
Share capital reduction demerger
An alternative method to separate a company is by reducing the parent company’s share capital. This involves decreasing the capital of the subsidiary company that is being transferred to new shareholders or holding companies controlled by those shareholders. This reduction of capital demerger can be beneficial.
- 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
In a liquidation demerger, a company is dissolved and its assets are given to new entities. Shareholders from the original company receive shares in the new businesses as compensation. If shareholders disagree on the company’s future and want to go in different directions, a demerger can be a strategic option to allow each shareholder to pursue their own path.
Benefits of demerging
One of the primary reasons corporations choose to demerge is to increase value for their shareholders. After a demerger, the newly formed company often issues shares to its shareholders. If the demerger results in the expected advantages, profits and share prices of both companies will increase. This may be due to the fact that separate management teams are in charge of their own successes and failures without interference from the main board. With clearer accountability for outcomes, there is likely to be greater motivation for the teams to achieve financial targets. Additionally, division of management teams allows CEOs to focus on their specific strengths. Demerging also enables each new business to raise its own capital rather than relying on centralized budgets. In the event of a failed joint venture or acquisition, each partner can cut their losses and continue running their own independent company.
Considerations before demerging a company
A careful assessment of different factors is necessary before moving forward with a demerger in Croatia to guarantee a seamless and effective transition. This involves examining the company’s assets, debts, and activities, as well as grasping the legal and regulatory obligations at hand. Taking into account the effects on stakeholders, including shareholders, workers, clients, and vendors, is also important in order to prevent any possible risks or interruptions. In general, thorough planning and attention to these factors are vital for a successful demerger process in Croatia.
Contact us
If you are thinking about separating your company in Croatia, our team is available to help you throughout the entire process. Using our knowledge in corporate law and business deals, we can offer personalized advice to make sure the demerger goes smoothly and successfully. Whether you require help with following legal regulations, analyzing finances, or communicating with stakeholders, we are dedicated to aiding you in reaching your objectives efficiently. Get in touch with us now to set up a meeting and learn about how we can assist in your company’s demerger process.