Split-off a company (demerge) in Albania
A company might choose to undergo a demerger as a strategic decision to move some or all of its business activities to another entity. In essence, a demerger happens when a company splits its ongoing operations into distinct parts, forming a new independent entity, or disposing of/dissolving the separated unit. The company that transfers its activities is called the demerged entity, while the company receiving the activities is referred to as the resulting company.
Types of demergers
There are three main choices for splitting a company in Albania, 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 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
One alternative method of separating a company is by reducing the parent company’s share capital and similarly decreasing the capital of the company being transferred. This allows for the transfer of a trading operation to new shareholders or holding companies under their control. A reduction of capital demerger could prove to 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
In a liquidation demerger, a company is dissolved and its assets are divided among new entities. Shareholders of the dissolved company receive shares in the new entities in exchange for their stake in the winding up process. When shareholders have differing opinions on the company’s future and wish to pursue different paths, a demerger may be an option. This strategic decision enables each shareholder to pursue their own direction independently.
Benefits of demerging
One of the primary reasons corporations choose to demerge is to create more value for their shareholders. After a demerger, the newly formed company typically issues shares to its shareholders. If the demerger results in the expected benefits, profits and share prices for both resulting firms are likely to increase. Profitability may improve because separate management teams are accountable for their own performance without interference from the main board. This clarity on accountability can lead to increased motivation to achieve financial goals. Additionally, division of management teams allows CEOs to focus on their specific area of expertise or brand. Demerging enables each new business to raise capital independently instead of relying on centralized budgets. Another advantage is that in the event of a failed joint venture or acquisition, each partner can limit their losses and continue to run their separate companies.
Considerations before demerging a company
A comprehensive assessment of multiple factors is necessary in Albania before moving forward with a demerger to guarantee a seamless and successful transition. This evaluation should encompass examining the company’s assets, liabilities, and operations, as well as comprehending the legal and regulatory obligations. It is vital to also take into account the effect on stakeholders, including shareholders, employees, customers, and suppliers, in order to minimize possible risks or disturbances. In general, careful planning and consideration of these elements are crucial for a successful demerger process in Albania.
Contact us
If you are thinking about splitting up your company in Albania, our team is available to help you through the entire process. We have specialized knowledge in corporate law and business deals, allowing us to give you personalized advice for a seamless and prosperous demerger. 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 discover how we can assist your company through the demerger process.