International aspects of demergers

Demergers are one of the most complex types of corporate transaction, especially when they involve international aspects such as non-resident companies, companies registered overseas, companies with overseas assets or trades, or non-resident shareholders. For non-resident shareholders, the main aspects requiring consideration are their potential liability to UK tax, and their exposure to local tax in their jurisdiction of tax residence. For companies registered overseas, the main issue is that their corporate governance falls under foreign corporate law provisions, so a demerger will not be carried out under UK legal principles for which UK tax law is written. For non-resident companies carrying out a demerger, care is required to look not just at the company’s UK and foreign tax position, but also the consequential impact on UK shareholders.