Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Demerger definition

What does Demerger mean? In practice, a demerger is the separation of one or more businesses from a corporate group so they operate independently, usually with substantially the same ultimate shareholders and separate management. It is a descriptive corporate reorganisation term rather than a single companies-law procedure. In the UK and Ireland, tax legislation includes regimes commonly referred to as statutory demerger rules, which can allow tax‑neutral treatment or exempt distributions where strict conditions are met. Typical implementation routes include: - Capital reduction demerger. - Scheme of arrangement. - Hive‑down of a business to a new subsidiary followed by a distribution in specie of its shares (often...

A practical guide for UK corporate lawyers to demergers: statutory demergers, direct and indirect; section 110 liquidations and capital reductions; partition demergers, steps, reserves and key tax conditions

Published by a LexisNexis Corporate expert

Practice notes

A demerger is a form of corporate reorganisation enabling a company to separate its operations. This separation occurs when the company transfers one or more elements of its business to one or more other companies, which may sit within its group or be outside it. The recipient (transferee) company can be overseen by the same directors as the transferor, or by different directors. Shares in the transferee are usually held by at least some of the transferor’s shareholders, though the way those shares are apportioned between them may vary.

Key features of a demerger

preservation of business (the demerged business continues after the demerger, and is carried on separately)
preservation of shareholders (the demerged business will usually be owned by some mix of the shareholders who owned it before the demerger, ie taken as a whole, the shareholder base is the same before and after the demerger, it is not a vehicle to bring new investors into a company or group)
no consideration is paid in connection...

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Web page updated on 21/05/2026

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