Types of company demerger
Company demerger operations have recently been subject to several European legislative reforms aimed at harmonizing legal frameworks and promoting the freedom of establishment within the European Economic Area, particularly through Directive (EU) 2019/2121, implemented in Italy by Legislative Decree No. 19 of 2 March 2023, which amended Directive (EU) 2017/1132.
One noteworthy innovation is the introduction of the concept of partial demerger under Article 160-ter(1)(4)(b) of Directive (EU) 2017/1132. A partial demerger occurs when the demerged company transfers only part of its assets and liabilities to one or more beneficiary companies, in exchange for the allocation of shares or quotas of either the beneficiary companies or the demerged company itself, or both, to its shareholders. This form differs from the total demerger, in which all the company’s assets and liabilities are transferred to one or more beneficiaries, resulting in the extinction of the demerged company.
Demerger procedure: operational phases
The procedure for a company demerger, similar to that for a merger, consists of several stages designed to ensure transparency and protect all parties involved. Although much of the legal framework mirrors that of mergers, it unfolds in three main steps: the demerger plan, the shareholders’ resolution, and the execution deed.
- Preparation and publication of the demerger plan: The directors of each participating company must prepare a detailed demerger plan setting out the terms and conditions of the transaction, including the identification details of the companies, the share allocation criteria, any non-proportional demerger clauses, and the accounting date from which operations are to be recorded. This plan must be filed with the Companies Register (or published on the company’s website) at least 30 days before the shareholders’ meeting.
- Approval of the demerger: The demerger must be approved by an extraordinary shareholders’ meeting of each company involved, using the majorities required for amendments to the articles of association. For partnerships (such as general partnerships), the majority is calculated according to each partner’s share of profits. In limited liability companies and joint-stock companies, standard voting majorities apply. Shareholders who disagree may exercise their right of withdrawal in specific cases, such as in a heterogeneous or cross-border demerger.
- Execution and registration of the demerger deed:The process concludes with a notarial deed. The transaction may be executed only after 60 days (or 30 days, if no joint-stock company is involved) from the registration of the last resolution, allowing creditors to object. The final registration of the deed with the Companies Register (that of the beneficiary or resulting company) gives the demerger constitutive effect. Cross-border demergers also require a preliminary certificate confirming compliance with legal obligations.
Required documentation
To ensure transparency, the demerger procedure requires documentation similar to that used for mergers. The main document is the demerger plan, prepared by the directors, which must include details such as the type and registered office of the companies involved, the draft articles of incorporation of the beneficiaries, the share exchange ratio, and the effective date for accounting and profit allocation.
In addition, the following supporting documents are required (though they may be waived in simplified cases such as demerger by contribution):
- Statement of assets and liabilities: An updated financial statement not older than 120 days before filing the plan, providing creditors with the information necessary to exercise their rights.
- Directors’report: A legal and economic explanation of the demerger plan, including the criteria used to determine the share exchange ratio and any significant post-publication changes.
- Experts’report: An independent expert or auditor must assess the fairness of the share exchange ratio and the valuation methods used.
All documentation, including the last three annual financial statements, must be made available at company offices (or online) for shareholders at least 30 days before the meeting. Unanimous consent allows for certain reports to be waived.
In the field of foreign real estate investments in Italy, proper corporate structuring is essential for asset protection and efficiency. The Boschetti International Law Firm, with extensive experience in cross-border corporate transactions such as demergers, assists investors in creating and reorganizing corporate vehicles for property acquisition and management.
Total or partial demergers allow for the separation of real estate assets from operational activities, enabling clearer management and targeted asset protection. In international settings, these processes require the coordinated application of Italian and foreign laws—a complex balance that the Boschetti Firm ensures through its expertise in corporate and tax law.
The law firm’s assistance also includes the preparation of documents for legality checks and preliminary certification, now reinforced under Italian law. This ensures that foreign investors benefit from a fully compliant process, minimizing litigation risks and maximizing the return on their real estate investments in Italy.
