Demerger

A demerger is the transfer of all or part of a company’s assets to other companies. In exchange, shares of the receiving company are issued to the demerged company’s shareholders or to the demerged company itself. Demergers are governed by Arts. 159-179 of the Turkish Commercial Code.

Types

• Full demerger: All of the company’s assets are divided into parts and transferred to other companies; the demerged company ends and is deleted from the trade registry.
• Partial demerger: One or more parts of the company’s assets are transferred to other companies; the demerged company continues. Shares may be issued to the demerged company’s shareholders or to the demerged company itself (creating a subsidiary).

Process

1. Demerger agreement or plan: A demerger agreement for transfer to an existing company, a demerger plan for transfer to a new company; the assets and liabilities to be transferred are listed individually.
2. Demerger report: Explains the rationale and consequences.
3. Call to creditors: Creditors are invited to declare their claims through three announcements in the Turkish Trade Registry Gazette and, on request, their claims are secured.
4. Inspection right: Shareholders may inspect the documents before the general assembly resolution.
5. General assembly resolution and registration: The demerger takes effect on registration with the trade registry.

Uses

• Placing different business lines in separate companies,
• Preparing a business line for sale (before an exit),
• Moving real estate or shareholdings into a separate company,
• Resolving a split between shareholders by dividing the company.

Tax and Competition

If the conditions in the Corporate Tax Law are met, a demerger can be tax-neutral. If a demerger results in control of a company passing to another undertaking, it may require Competition Board approval; see Acquisition. For companies combining, see Corporate Merger.