Demergers—glossary of terms

The following Corporate practice note provides comprehensive and up to date legal information covering:

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Demergers—glossary of terms


Buy outThis is the purchase of a company or a controlling interest in a corporation’s shares. This often happens when a company’s existing managers wish to take control of the company.


Capital redemption reserveA non-distributable reserve into which amounts are paid following a redemption or share buyback in accordance with CA 2006, s 733. The company may use the capital redemption reserve to pay up new shares to be allotted to members as fully paid bonus shares.
Capital reduction demergerThis method involves a capital reduction of the parent company of the target group, in consideration for which the demerged business is transferred to a new company, which in turn issues shares to the shareholders. See Practice Notes: Demergers—an introduction for corporate lawyers and Reduction of capital—a quick guide. For specific tax information see: Capital reduction demergers.
Chapter 11Refers to debtor-in-possession restructurings under chapter 11 of the US bankruptcy code.
Class rightsA company having a share capital may have separate classes of shares. A type of share will form a separate class if the rights attached to it differ from those attaching to other shares of the company. Different classes of shares include ordinary shares, preference shares, deferred shares and redeemable shares. For further information, see Practice Note: Class rights and variation of class

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