Split-off a company (demerge) in Turkmenistan
A demerger is a strategic business decision where a company transfers some or all of its commercial activities to another entity. This process involves dividing the company’s ongoing operations into separate parts, leading to the creation of a new independent entity or the sale/dissolution of the divided unit. The company that is transferring its activities is called the demerged entity, while the company receiving these activities is known as the resulting company.
Types of demergers
There are three main ways to demerge a company in Turkmenistan, each with its own tax advantages.
Statutory demerger
When a new company is created and shares are given to the shareholders of the parent company, it is known as a “statutory demerger.” A “three-cornered” demerger happens when the parent company moves the new subsidiary to a different company, which then provides 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 give a direct dividend to its shareholders on the new shares.
Share capital reduction demerger
An alternative method for separating a company is by reducing the parent company’s share capital. This involves decreasing the capital of the transferring company and transferring its operations to new shareholders or holding companies under their control. A reduction of capital demerger can be advantageous in this situation.
- 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 passed on to new entities through a liquidation demerger. The shareholders of the original company receive shares in the new companies as compensation for their interests during the winding up process. In cases where shareholders have different opinions on the company’s future direction and wish to pursue different paths, a demerger may be chosen. This strategic decision enables each shareholder to chart their own course independently.
Benefits of demerging
One of the key reasons why companies choose to demerge is to increase value for their shareholders. After a demerger, the new company typically issues shares to the shareholders. If the demerger results in the expected benefits, profits and share prices for both resulting companies are likely to increase. This is because separate management teams will now be solely accountable for their performance, leading to greater clarity and motivation to achieve financial goals. Additionally, CEOs can focus on their area of expertise after the demerger. Each new business can also raise capital independently instead of relying on centralized budgets. In cases where a joint venture or acquisition does not succeed, both partners can cut their losses and continue running their own separate companies.
Considerations before demerging a company
A thorough examination of different factors is necessary before moving forward with a demerger in Turkmenistan to guarantee a seamless and prosperous transition. This involves evaluating the company’s assets, debts, and activities, as well as grasping the legal and regulatory obligations. It is also important to consider the effects on stakeholders, such as shareholders, employees, customers, and suppliers, to minimize any possible risks or interruptions. In general, careful planning and consideration of these factors are crucial for a successful demerger process in Turkmenistan.
Contact us
If you are thinking about splitting up your company in Turkmenistan, our team is ready to help you with every part of the process. We have extensive knowledge of corporate law and business deals, allowing us to offer personalized advice to guarantee a seamless and prosperous demerger. Whether you require help with following legal requirements, analyzing finances, or communication with stakeholders, we are dedicated to aiding you in reaching your objectives. Get in touch with us now to set up a meeting and discover how we can assist you throughout your company’s demerger process.