Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Liabilities definition

What does Liabilities mean? In practice, a scheme’s liabilities are what it owes: the future benefit payments (for example, pensions and lump sums) and the scheme’s expenses. They are usually measured as the present value of expected cashflows, determined by an actuary using assumptions on discount rate, longevity, inflation and expenses. Comparing liabilities with the market value of assets gives the funding level: a deficit arises where liabilities exceed assets; a surplus where assets exceed liabilities. “Liabilities” is a descriptive term used across legal, actuarial and accounting contexts rather than a single statutory definition. However, valuation bases are prescribed for particular purposes. In...

UK demergers: effects on employee share schemes (SIP, SAYE, CSOP, EMI), preserving value, early vesting, rollovers, HMRC limits, EBT treatment and tax

Published by a LexisNexis Share Incentives expert

Practice notes

What is a demerger?

A demerger is a form of corporate organisation that separates businesses conducted by a company or group of companies, so that, following the demerger, the trading activities are run by independent management teams but remain, at least initially, under the control and ownership of all or any of the same shareholders as before. This approach is often undertaken in order to sharpen the management of discrete elements of the trading business, to ring-fence Liabilities linked to particular trades, or to enhance shareholder value where the sum of the parts is considered greater than the wider conglomerate as a whole.

There are several ways to carry out a demerger, including:

an in specie distribution by way of a dividend of Shares in the Subsidiary being demerged to the parent company’s shareholders — typically the most straightforward route in practice
a return of capital delivered as shares in the demerging subsidiary to the parent company’s shareholders
a three‑cornered demerger, under which the parent’s shareholders receive shares in a newly incorporated company formed to hold the demerged business, and
a demerger achieved by utilising a section 110 of the Insolvency Act 1986 liquidation scheme
a scheme of arrangement...

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Web page updated on 22/05/2026

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