½Û×ÓÊÓƵ

A liquidation demerger normally involves the insertion of a new holding company at the top of the group, followed by a liquidation of the new holding company in which the liquidator distributes the businesses or subsidiaries that are being demerged to two new companies, which each issue shares to the shareholders. Unlike a statutory demerger, a liquidation demerger does not qualify for the tax reliefs that are specifically available for exempt distributions. It may, nonetheless, be carried out in such a way that it does not trigger tax charges, either on income or capital, for the shareholders or any of the companies involved in the demerger. In many cases it will also be possible to avoid, or minimise, paying stamp taxes, although this is an area where care will be needed.

The valuable tax reliefs available for an exempt distribution demerger do not apply to a liquidation demerger¹, so it is necessary to organise the reconstruction in a different way, albeit to achieve largely the same results. This is usually done by structuring