Our Demerger Service
What is a Demerger?
A demerger is a separation of different business activities carried on by a company or group into separate companies or groups, which are then (usually) owned by the same shareholders. This process often requires expert solicitors to navigate the legal complexities, in particular to ensure the intended tax treatment is achieved.
Reasons to carry out a demerger
Companies and groups demerge for various reasons, including:
- Dividing a company or group between shareholders in dispute.
- Separating successful businesses from struggling businesses.
- Splitting trades or business that are contained in the same company or group in to separate companies or groups.
- Separating a trading business from real estate interests, often in anticipation of a sale.
- Freeing one business from the regulatory or financial requirements imposed on it due to another business.
- Inability to sell a business (which can be demerged instead).
- Dividing a jointly owned group.
Types of Demerger
There are several methods of effecting a demerger, each one having its own advantages and disadvantages.
The chosen method will usually be influenced by tax considerations and the availability of distributable profits in the company. Legal and tax advice from expert solicitors and tax advisors is crucial in this planning stage.
We can assist in choosing the appropriate demerger structure. We can also recommend tax advisors to give the necessary tax advice and seek the required tax clearances. The main ways of structuring a demerger are set out below:
Direct dividend
The parent company declares a dividend in specie (i.e. a distribution of assets rather than cash) of the shares of the subsidiary to be demerged, as a result of which ownership transfers from the parent company to its shareholders.
Indirect or three-cornered dividend
The parent company declares a dividend in specie of the shares of its subsidiary (or of the assets of its business) to be demerged to a newco (or existing third-party company), and the newco/third party subsequently issues shares to the parent company’s shareholders.
If structured correctly, a three-cornered dividend can qualify as a scheme of reconstruction, which may offer substantial tax relief advantages over a direct dividend structure.
Indirect or three-cornered reduction of capital
This involves detailed planning and the involvement of experienced solicitors to manage the commercial and legal aspects and tax advisors to support on the tax requirements.
The parent company carries out a reduction of share capital by cancelling a class of shares which is satisfied by the transfer of the business to be demerged to a newco which then issues shares to the shareholders of the parent in proportion to their shares that were cancelled by the parent
This is the most common form of structure used for demergers and can be used where a company does not have sufficient distributable profits to declare a dividend in specie or does not want to reduce its distributable reserves. It quite often this forms part of a wider reorg in advance of the demerger to create the required structure, utilising reserves of the group to create it.
Scheme of arrangement
A court-approved procedure under Part 26 of the Companies Act 2006, which is carried out with shareholder consent and (frequently) creditor approval, to make a compromise or arrangement with the members or creditors of the parent company.
This is often used in combination with the direct dividend, three-cornered dividend, three-cornered reduction of capital and/or a liquidation scheme.
Liquidation scheme
The parent company is liquidated under section 110 of the Insolvency Act 1986 and its assets are transferred to two (or more) newcos.
The liquidator accepts the shares in the newcos as consideration for the transfer of the assets to the newcos and then distributes the shares to the parent’s shareholders pursuant to the parent’s winding-up.
How We Can Help with Your Demerger
Our expert Corporate team is here to guide you through every step of the demerger process. With substantial experience in advising businesses and groups of all sizes, we provide tailored advice to ensure your demerger aligns with your strategic objectives, while being efficient and compliant with relevant laws and regulations.
- Understanding Your Needs - Every business is unique, so we start by understanding your objectives to recommend the most suitable demerger structure.
- Exploring Suitable Demerger Structure - We’ll explain the various demerger methods available.
- Tax Efficiency - We work closely with tax advisors to structure your demerger in the most tax-efficient manner, ensuring compliance with all applicable regulations.
- Legal Expertise and Drafting - We prepare all necessary legal documentation, including shareholder agreements, court applications, and any required filings with Companies House.
- Navigating Challenges - Whether dealing with shareholder disputes, regulatory hurdles, or financial considerations, our team proactively identifies and addresses potential challenges.
- Ongoing Support - As a full-service law firm we offer ongoing support to ensure your new business structures are operating effectively and in line with your goals.
Our Experience with Demergers
Our experienced corporate solicitors have dealt with a wide variety of circumstances including mergers and demergers. We understand that every circumstance is different so we do not employ a 'one-size-fits-all' approach.
We work closely with our clients to understand their unique situation and provide accurate legal advice to find the best solution.
- We have recently acted for a Newco registered care provider in relation to a demerger of a registered care home. This involved a detailed understanding of the tax implications/requirements of a demerger effected by a distribution in specie followed by a buy-back of shares.
- We recently advised a television production company in connection with the corporate reorganisation of its corporate group by way of a demerger. The purpose of the demerger was to separate a particular production from the other trades undertaken by the corporate group. The reorganisation involved a number of steps, including an asset sale between the parent company (Parent) and its wholly subsidiary (Subsidiary), a share for share exchange, a dividend in specie, a share capital reduction of Holdco and the subsequent transfer of the share capital of Subsidiary to a new holding company in consideration of the share capital reduction, to create two distinct corporate groups. Tax advice and HMRC tax clearance was obtained before proceeding with the implementation of the demerger.
- We have advised a family-owned investment company in relation to a demerger of a group structure to remove four companies from the overall group structure. The demerger involved several steps, including a share-for-share exchange, a dividend in specie, the preparation of four separate demerger agreements in order to move each of the four subsidiaries into newly incorporated special purpose vehicles, and finally reductions of capital and issues of new shares. Completion had to be staggered over 6 stages of completion, with a pause between the fourth and fifth stages to allow the reductions of capital to occur at Companies House. Tax advice and HMRC tax clearance were obtained prior to proceeding with the implementation of the demerger.
- We advised the majority shareholder of a large healthcare company on the demerger of the Company’s group, driven by the divorce of the two shareholders of the Company. The demerger involved several steps, including a redesignation of shares, incorporation of a new holding company, a dividend in specie, sub-division and redesignation of shares, incorporation of a second new company, preparation of bespoke articles of association, reduction of capital, a share buyback, transfer of shares, and distribution of assets. Tax advice and HMRC tax clearance was obtained before proceeding with the implementation of the demerger.
Why Work With Our Corporate Lawyers?
- We have been ranked as a Top Tier law firm by the Legal 500 for the last seven years.
- You will receive city-quality corporate law advice at regional prices.
- Price transparency - we provide our clients with an estimate at the outset of any piece of work, with ongoing updates throughout the matter.
- Our Corporate Partner-led service ensures you receive the very best legal advice and commercially minded support.
- We have a large team with corporate finance experience across a diverse variety of business sectors, including financial services. Our team focuses on achieving your objectives and meeting your deadlines, especially in legal matters pertaining to public companies.
- We are a full-service law firm operating from a one-site office, which means our teams communicate effectively and efficiently, and our Corporate Lawyers can draw on support from other specialist lawyers, such as property and employment lawyers.
- Our Corporate Solicitors use technology and AI effectively to ensure that we are working as efficiently as possible and that geographical distance is no bar to us from providing you with excellent client service.
- Our Corporate Team were named “Team of the Year (Cheshire)” at the 2025 North West Rainmaker Awards.
- Myerson was shortlisted for ‘Large Deal of the Year (£50m+)’ at the Yorkshire Rainmakers Awards 2026 for advising AQA on its acquisition of Realise Training Group, highlighting the strength of the firm’s Corporate team in delivering high-value, complex transactions across the UK.
- We were the winners of ‘Corporate Team of the Year 2021’ at the Manchester Legal Awards.
- Take a look at the Myerson Promise for further benefits of working with us here.
Testimonials
Mr Preston
Chris Moss's advice and support was exceptional. I would highly recommend.
Mr. Maitland, VendiTech
Myerson has been exceptional to work with, combining a high level of professionalism with a pragmatic, commercially minded approach. Communication is always clear, timely, and responsive, which gives us real confidence when navigating complex decisions. Chris, Charlotte and Richard provided invaluable support across multiple areas of our business. Their guidance has been instrumental to our continued success and has played a key role in giving us strong confidence around compliance as we scale and evolve.
Gary Johnson, CDL
The strength that Myerson brings to CDL and its group companies is an intimate understanding of our products and services and how they are utilised in the various sectors of our evolving marketplace. CDL and Myerson have worked together for over 10 years and in that time CDL have been fortunate to attract, court and secure many new contracts including large banking and global organisations.
Tim Webb, RTA Claim Solutions
Myerson have been hugely professional and supportive in providing expert legal advice to the business. For us, their quality of service and expert knowledge of commercial business was equally as important as their undoubted legal capabilities. We hope to be able to continue to work with them over the long term.
Tony Sampson , J2 Retail Ltd
Unphased by the ‘big names’ and frequently head to head with much larger firms, they have always worked effectively on our behalf as both a business and as shareholders, and have represented us extremely well in many complex and difficult situations. Myerson partners and lawyers have an excellent grasp of the commercial realities of our business – something that is equally as important as their undoubted capabilities as lawyers.
David Hibbert, Stax Trade Centres PLC
We were introduced to Myerson back in 1986 with a view to them advising us on our MBO. Myerson have always been there with clear, easily presented counsel as to how to deal with every aspect of business life. We respect their honesty and integrity and have no qualms in recommending them to any up and coming entrepreneurs.
Mr. Roberts, Communications Plus Ltd.
Chris Moss, Melisa Chaplow and Charlotte Peers have been exceptional. Thank you.
Mike Forsyth - Founder and Chairman, Safer Sphere
Myerson Solicitors acted for us in a complicated Management Buy-Out transaction. Akeel, Palma, Simon, Andrew, and the team supported completion in a tight time frame with the utmost professionalism and diligence. They coordinated and cooperated seamlessly with the wider advisors and stakeholders, ensuring full protection and compliance with the transaction. We have worked with Myerson on a number of legal aspects for over 5 years, and would highly recommend their services.
Colin
Supported my business from the outset. Always there when needed. Superb integrity and pricing. Always gets the job done effectively with open dialogue and communication at every point. Yes I highly recommend.
Chambers UK Guide 2026
The Corporate team at Myerson is the perfect size for a balance between expertise and personal service.
Chambers UK Guide 2026
Myerson's Corporate team is attentive, available and technically knowledgeable.
Chambers UK Guide 2026
Myerson's Corporate Team were good to deal with and we worked well together.
Legal 500, 2024
Responsive, always willing to provide some direction, guidance and support, even at short notice, and, due to the familiarity of the business across the team, there are multiple contact points which means there is always somebody to speak to who understands our company and objectives.
Legal 500, 2024
The whole team is responsive and highly approachable, taking time to understand the business and framing legal matters in a manner understandable to the audience – working with a range of people across our business.
Legal 500, 2024
They have always looked at the whole picture and taken time to understand my business, so advice is tailored. No time-wasting and treated like I am their only client.
Legal 500, 2024
Well resourced and able team that expertly and adequately handle whatever we throw at them as our retained commercial lawyers.
Legal 500, 2024
Smaller boutique corporate team who are very responsive, professional and add value to corporate transactions.
Meet Our Corporate Solicitors
Home-grown or recruited from national, regional or City firms. Our corporate solicitors are experts in their fields and respected by their peers.
Contact Our Experts
You can contact our lawyers below if you have any more questions or want more information:
0161 941 4000
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