law
Law is a set of rules that are created and are enforceable by social or governmental institutions to regulate behavior,Robertson, ''Crimes against humanity'', 90. with its precise definition a matter of longstanding debate. It has been vario ...
, is the transfer of a company's (or several companies') business to a new company. The old company will get put into liquidation, and shareholders will agree to take shares of equivalent value in the new company.
In
UK company law
The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal ...
, the governing provisions are in the
Insolvency Act 1986
The Insolvency Act 1986c 45 is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK.
History
The Insolvency Act 1986 followed the publication and ...
, ss. 110–111. The sanction of a court is not required (unlike under a so-called "
scheme of arrangement
A scheme of arrangement (or a "scheme of reconstruction") is a court-approved agreement between a company and its shareholders or creditors (e.g. lenders or debenture holders). It may affect mergers and amalgamations and may alter shareholder o ...
", which could or creditors). Yet if a shareholder objects, he or she may require a cash payment instead of shares. Creditors who object to have their debts transferred to a new company can demand satisfactions during the old company's liquidation.
Small private companies, family companies and investment trusts often use the procedure. The purposes can vary, from changing the objects of the business, varying share class rights, or reorganize before a
demerger
A demerger is a form of corporate restructuring in which the entity's business operations are segregated into one or more components. It is the converse of a merger or acquisition.
A demerger can take place through a spin-off by distributed or t ...
takes place.
See also
*
Bankruptcy
Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...
*
Mergers and acquisitions
Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...
References
* Len Sealy and
Sarah Worthington
Dame Sarah Elizabeth Worthington, (''née'' Monks; born 18 February 1955) is a British legal scholar, barrister, and Deputy High Court Judge in the Chancery Division, specialising in company law, commercial law, and equity. From 2011 to 2022, ...
(2007) ''Cases and Materials in Company law'', 8th Ed., Oxford University Press
* Paul Davies (2008) ''Gower's Modern Company Law'', 8th Ed., Sweet and Maxwell
Corporate lawMergers and acquisitionsBusiness terms