Spin-offs, split-offs and other strategic restructuring transactions at listed companies

Wednesday 31 January 2024

Benjamin Leisinger
Homburger, Zurich

Cintia Martins Costa
Elvinger Hoss, Luxembourg

Cecil Quillen
Linklaters, London

Report on joint session of the Securities Law Committee and the Capital Markets Forum at the IBA Annual Conference in Paris

Thursday 2 November 2023

Session Chairs

Massimiliano Giuseppe Danusso BonelliErede, London; Publications Officer, Capital Markets Forum
Trevor Norwitz Wachtell, Lipton, Rosen & Katz, New York; Senior Vice Chair, Securities Law Committee

Stephanie Fougou Technicolor, Paris
Cecilia Mairal Marval O'Farrell Mairal, Buenos Aires; LPD Council Member
Pieter Schütte Stibbe, Amsterdam; Conference Quality Officer, Capital Markets Forum
Ryan Samuel Wessels Bowmans, Johannesburg; North American Forum Liaison Officer, Securities Law Committee

The session was organised by the Securities Law Committee (Lead) and the Capital Markets Forum.

This session – probably one of the liveliest sessions of the entire Annual Conference with many great discussions involving the whole audience – explored why and when spin-offs, split-offs and other strategic restructuring transactions are undertaken by public companies, what factors are considered in choosing the best way to execute these transactions, and how to ensure their success and avoid pitfalls, with a particular focus on the capital markets regulatory requirements imposed on public issuers.

Trevor Norwitz began by explaining the main differences between a spin-off and a split-off and how to execute them in the United States. Many audience members were especially interested by the American model of ‘split-offs’ for corporate separations (in which shareholders of the parent company choose whether to take the stock in the spun-off company or stay only invested the parent company), which is not used in other jurisdictions.

Stephanie Fougou went on to explain the way these transactions are carried out in France, including the relevant documents and the typical set-up, including the importance of insurance policies in connection with separation agreements, retention plans and ‘neutral persons’.

Cecilia Mairal reported on how spin-offs are effected in countries other than the jurisdiction of the parent company where assets of businesses that are part of the new ‘SpinCo’ are located. As an example, she discussed Argentina, highlighting specific issues (labour law, etc) and legal provisions regarding creditor protection.

The session featured a lively discussion amongst panellists, chairs, and audience members on issues and problems in various cases and jurisdictions around the world. The panellists, particularly Pieter Schütte, presented specifics, including tax implications, execution risks, legal and regulatory challenges (eg, reapplying for licenses for a SpinCo) and fines and/or reputational damage in the event of non-compliance.

Ryan Samuel Wessels outlined specific issues in South Africa and highlighted the importance of preparing the carve-out and pro-forma financial statements well in advance, so that they do not become the gating item in the transaction.