A division is a division of a company into two or more companies, whether new or pre-existing. It is an operation contrary to the merger. In it, a company makes the decision to separate or divide its assets, liabilities and capital to be able to form a set of two or more companies. The original company is called splinter, and companies that are created after the operation are called splinters.
Characteristics of business spin-offs
The characteristics of a split are several, and very basic:
- Situation that occurs when a company divides its liabilities, assets and capital stock in two or more parts that are contributed to other companies (spun-off).
- The original partners of the company are also members of the companies created after the operation.
- The original society may or may not disappear.
- The original company usually changes its name or denomination.
- The spin-off companies may be new, or they already existed.
Types of spin-offs in the company
In addition to these characteristics, there are three forms of cleavage:
- Total or pure: the total or pure form consists of when a company divides its social assets into two or more parts and transfers them to other companies, whether new or pre-existing. Then the original society disappears.
- Partial: the partial form is when a company delivers part of its social assets to one or more companies, and in this case the original company does not disappear.
- Of majority stakes: the form of majority stakes occurs when a company that has a majority stake in the capital stock of another, transfers these rights and values to a different company.
In addition, in all these cases, the transfer of assets or rights will imply that the original partners are rewarded in some way, such as with the delivery of rights over the beneficiary companies. In other words, a spin-off has to be well thought out to be beneficial.