Ahlawat & Associates


Demerger of Company

Introduction of Demerger

A demerger also known as a spin-off, is a restructuring mechanism where a corporate entity is split into separate parts which become new legal entities. The legal entities form their own separate identity with their distinct assets, liabilities, and functions. 


In a demerger, the parent corporation transfers ownership of the subsidiary or business unit to its current shareholders, essentially separating the two into separate legal organisations. These recently established organisations function as autonomous businesses, frequently with their management groups and boards of directors.


Ahlawat & Associates is one of the top law firms for demerger advisory. We have a splendid track record of providing services like amalgamation and demerger both in the domestic market as well as internationally. We have exemplary associates who are well versed with the recent regulations in demerger law and hence we provide innovative solutions to your problems. We help in focusing on your core operations by spinning off the subsidiaries and unlocking the potential of your organisation. We ensure that all compliances and regulatory requirements are followed so that the demerger can take place without any issues. 

Legal Framework for Demerger

The Companies Act 2013 provides the legal framework for demergers. The provisions deal with the powers and functions of the National Company Law Tribunal to sanction schemes of arrangement or compromise. It also outlines the factors that have to be taken into consideration for a demerger. 


Ahlawat & Associates is one of the finest law firms which helps with the demergers of a company. We provide services like providing the legal framework for demerger schemes, including the transfer of assets, liabilities, and other stakeholders to the newly created entity. We also provide schemes for the formation and administration of the newly formed body corporate. 


We ensure that the books and papers of the demerged company are preserved so that a continuous record is kept of the records and documents. We also address the liability of the offenses committed before the demerger. We help clarify the extent of liability and responsibility for the offenses committed.


We also coordinate the entire process with Serious Fraud Investigation Office (SFIO) in conducting an investigation of any offense committed during the demerger process. 


We ensure that all compliances are in place and your newly formed company is ready to function. 

Our Approach to Demerger

Ahlawat & Associates focuses on efficiency and integrity as our core values which makes it one of the best legal firms for the demerger of companies. 

  • With value creation as our sole intention, we help demerging companies get a clearer understanding of the potential of demerged assets which leads to greater profit. 
  • We help create an environment of transparency between the client and its newly separated entities attracting more investors and enhancing shareholder value. 
  • We ensure there is sufficient risk mitigation and any dispute arising out of a demerger is contained within its specific units and does not affect the entire organisation. 
  • We ensure there is improved governance and accountability by placing management at each entity separate from its parent organisation. 
  • We also take care of the rigorous compliances which are needed at the time of a demerger. 
  • We help streamline the organisational structures, reporting systems, and financial statements preventing a concentration of power and clarity to stakeholders. 

1. What are Demerger laws in India?

Demerger laws in India refer to the legal provisions and regulations that govern the process of demerger, which is the corporate restructuring strategy involving the separation of one company into two or more independent entities. The demerger laws in India primarily revolve around the provisions specified in the Companies Act, 2013, and the regulations set by the Securities and Exchange Board of India (SEBI). Here are some key points related to demerger laws in India:
  1. Companies Act, 2013
  2. Approval of Board of Directors
  3. Preparation of Demerger Scheme
  4. Approval from Shareholders and Creditors
  5. Approval from National Company Law Tribunal (NCLT)
  6. Transfer of Assets and Liabilities
  7. Compliance with SEBI Regulations

2. Process for Demerger of Company?

The process for demerger of a company involves several steps and requires compliance with legal and regulatory requirements. Here is a general overview of the process:
  1. Preliminary Evaluation
  2. Demerger Proposal
  3. Board and Shareholder Approval
  4. Demerger Scheme
  5. Approval from National Company Law Tribunal (NCLT)
  6. Documentation and Filings
  7. Transfer of Assets and Liabilities
  8. Compliance and Notifications
  9. Post-Demerger Activities
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