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SPIN-OFF AND SPLIT-OFF
WHEN A COMPANY
DIVIDES.
SPIN-OFF
The corporation has more than
one business. (2 or more
business).
The corporation decides to divorce
these two (or more) business.
The idea is to distribute ONE of
his two business (lets say) to its
existing shareholders.
CONDITIONS.
TWO WAYS OF
UNDERGOING A SPIN-OFF
The business is
given to
shareholders
directly
Direct
way
The Co.creates
first a subsidiary.
And then, the
Co. Gives the
Subsidiary to
the
shareholders.
INDIRECT
WAY
PRO-RATA and NON PRO-
RATA SPIN-OFFS
Pro- rata Spin-off: Distribution on a
proportional basis.
The receiving shareholders receive
the spun-off stock,
But they do not dive up their stock in
the major (or distributing) corporation.
PRO-RATA SPIN
OFF:
The distribution ONLY GOES to
certain shareholders.
The shareholders give up some (or
all) of their stock in the distributing
corporation
It is in exchange for the stock of the
controlled subsidiary.
PRO-RATA and NON PRO-
RATA SPIN-OFFS
NON PRO-RATA
SPIN OFF:
TERMINOLOGY:
DISTRIBUTING COMPANY: THE ORIGINAL
CORPORATION
DISTRIBUTED COMPANY: A SUBSIDIARY THAT THE
FIRST ONE HAD, AND IS SUBJECT TO
DISTRIBUTION.
Non pro-rata split-offs: they are referred to
as SPLITs OFF.
SPLIT – OFFS:
Non pro-rata spin-offs are referred to
as SPLIT-OFFS (just like a divorce
between 2 people)
SPLIT- UP:
A split-off (non pro –rata spin-off)
That results in one group of shareholders
Holding all the stock of the distributing Co.
And a second group of shareholders
Holding all the stock of the former subsidiary.
It is used to separate 2 business that have
BECOME INCOMPATIBLE.
Other case: some investors or lenders
want to provide capital to ONE but not to all
business operation.
To separate business where owner-
managers have different philosophies.
When it is better for the share value, cause
the stock market value the separate parts
more highly than combined operations.
When a spin-offf
is used:
SPIN-OFFS:
The separation of business operation
could lead to a greater
entrepreneurial drive for success.
The separation of business could be
ordered by court: think of the case of
Clarin/ TV media.//
Think of other cases of separation,
particularly under court order to
prevent monopolies.
TAX PROVISIONS
Regulated by INTERNAL REVENUE
CODE. (“afip” regulations)
Section 355 IR code.
The tax characteristics of a qualifying
spin-off under Section 355 make this
an attractive tool for solving certain
corporate challenges.
WHAT ARE THESE “TAX
CHARACTERISTICS”?
Section 355 I R Code: the distributing
corporation does not have to
acknowledge a gain on the stock that
has recently distributed.
And receiving shareholders are not
“double taxed”. They would be
double –taxed if they were to puy tax
on the shares received either as a
divident and as capital gain.
….But shareholders receiving the
distributed Co. Are not double-taxed.
Code Section 355 permits a spin-off
to be undergone without tax to either
the major corporation or to the
receiving shareholder.
Any gain or profit acquired by the
shareholders are deferred until the
stock is sold (later on)
WHAT ARE THESE “TAX
CHARACTERISTICS”?
THANK YOU !!

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Spin off and split-off

  • 1. SPIN-OFF AND SPLIT-OFF WHEN A COMPANY DIVIDES.
  • 2. SPIN-OFF The corporation has more than one business. (2 or more business). The corporation decides to divorce these two (or more) business. The idea is to distribute ONE of his two business (lets say) to its existing shareholders. CONDITIONS.
  • 3.
  • 4. TWO WAYS OF UNDERGOING A SPIN-OFF The business is given to shareholders directly Direct way The Co.creates first a subsidiary. And then, the Co. Gives the Subsidiary to the shareholders. INDIRECT WAY
  • 5. PRO-RATA and NON PRO- RATA SPIN-OFFS Pro- rata Spin-off: Distribution on a proportional basis. The receiving shareholders receive the spun-off stock, But they do not dive up their stock in the major (or distributing) corporation. PRO-RATA SPIN OFF:
  • 6. The distribution ONLY GOES to certain shareholders. The shareholders give up some (or all) of their stock in the distributing corporation It is in exchange for the stock of the controlled subsidiary. PRO-RATA and NON PRO- RATA SPIN-OFFS NON PRO-RATA SPIN OFF:
  • 7. TERMINOLOGY: DISTRIBUTING COMPANY: THE ORIGINAL CORPORATION DISTRIBUTED COMPANY: A SUBSIDIARY THAT THE FIRST ONE HAD, AND IS SUBJECT TO DISTRIBUTION. Non pro-rata split-offs: they are referred to as SPLITs OFF.
  • 8. SPLIT – OFFS: Non pro-rata spin-offs are referred to as SPLIT-OFFS (just like a divorce between 2 people) SPLIT- UP: A split-off (non pro –rata spin-off) That results in one group of shareholders Holding all the stock of the distributing Co. And a second group of shareholders Holding all the stock of the former subsidiary.
  • 9. It is used to separate 2 business that have BECOME INCOMPATIBLE. Other case: some investors or lenders want to provide capital to ONE but not to all business operation. To separate business where owner- managers have different philosophies. When it is better for the share value, cause the stock market value the separate parts more highly than combined operations. When a spin-offf is used:
  • 10. SPIN-OFFS: The separation of business operation could lead to a greater entrepreneurial drive for success. The separation of business could be ordered by court: think of the case of Clarin/ TV media.// Think of other cases of separation, particularly under court order to prevent monopolies.
  • 11. TAX PROVISIONS Regulated by INTERNAL REVENUE CODE. (“afip” regulations) Section 355 IR code. The tax characteristics of a qualifying spin-off under Section 355 make this an attractive tool for solving certain corporate challenges.
  • 12. WHAT ARE THESE “TAX CHARACTERISTICS”? Section 355 I R Code: the distributing corporation does not have to acknowledge a gain on the stock that has recently distributed. And receiving shareholders are not “double taxed”. They would be double –taxed if they were to puy tax on the shares received either as a divident and as capital gain.
  • 13. ….But shareholders receiving the distributed Co. Are not double-taxed. Code Section 355 permits a spin-off to be undergone without tax to either the major corporation or to the receiving shareholder. Any gain or profit acquired by the shareholders are deferred until the stock is sold (later on) WHAT ARE THESE “TAX CHARACTERISTICS”?