How to split a company – going your own way?

Aug 17, 2021

There are many reasons why shareholders or directors may want to split up a company or a group of companies. Some of the most common reasons for splitting a business are:

  • A breakdown of relationships between shareholders
  • To allow the business to diversify into new areas
  • As a precursor to a sale of one part of the business
  • To de-risk part of the business where one part is high risk
  • To decrease the costs and administrative burdens of operating a complex group structure

Some well-known businesses have recently considered separation for various commercial reasons.

Reasons for splitting a business

Wickes & Travis Perkins: Wickes demerged from the Travis Perkins group earlier this year. The motivation behind this was to allow Travis Perkins to focus on a distinct part of its business (construction) and to cut down operating costs associated with the group structure. In the months following, both companies have reported a significant rise in their revenues.

GlaxoSmithKline: GSK has recently announced plans to spin off its consumer healthcare division and retaining the pharmaceuticals division. The goal is to unlock value for the GSK’s investors by increasing profits in both divisions.

Although, both of the examples are public companies, demergers and other types of separation are equally well suited to private limited companies.

Demerging a Company

Splitting a company is often referred to as a “demerger” although there are various ways to achieve a separation. In order to identify which route works best for your company, we would recommend taking both legal and tax advice before embarking on a separation. If the separation is not structured correctly from both a tax and legal perspective, this could result in a hefty tax bill or other unintended liabilities down the line.

If you are thinking about preparing for a separation of your business, you will need to think about the business as a whole. Some questions you will need to consider, include:

  • What will happen to any valuable assets such as intellectual property, property and machinery? Will these remain with one part of the business or will both parts need to use them?
  • What will happen to customers and suppliers of the business?
  • Will the two new companies be able to compete with one another?
  • Does the company have any outstanding bank loans or other liabilities that will need to be paid off or restructured?
  • Will any of the management team or employees transfer to the new company?

How can we help with your demerger or company split?

Our Corporate team regularly assist clients with separating their businesses, via demergers and other forms of corporate reorganisation. Our experience allows us to advise businesses on the best options for them, taking into account legal, tax and commercial considerations.

If you are considering splitting your business, please contact:

> Yavan Brar on 01189 899713,
> Matthew Lea on 01189 898155 or
> Emma Roper on 01276 854903.

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to your own particular matter before action is taken.

Matthew Lea

Matthew Lea

Senior Solicitor, Corporate and Commercial Law

Emma Roper

Emma Roper

Solicitor, Corporate and Commercial

Sign up

Enter your email address for legal updates on Corporate and Commercial law.

Please see our privacy policy regarding use of your data.

Contact us

    The information you submit will be handled in accordance with our privacy policy.

    Latest Articles


    The Legal Room UK Podcast features a diverse range of specialists offering expertise on a variety of topics. 
    Subscribe on whatever podcast platform you use.

    Top Legal Insights


    Contract Law

    Material Breach of Contract

    What is a ‘material’ breach of contract by a party to a commercial contract? This is a critical issue regularly considered by the courts. What constitutes a material breach and what are the remedies?

    Property Law

    Commercial Lease: The Financial impact on Landlord and Tenant

    Coronavirus (COVID-19) and the restrictions now in place to control its spread, are having a significant effect on many business sectors.

    Divorce and Family Law

    Divorce in Lockdown: Can I get some discreet legal advice?

    We have spoken to clients who are unfortunately experiencing some family issues, and would like to obtain expert legal advice, yet don’t know how...

    Land & Property Dispute

    Restrictive Covenants – The Price of Modification

    Having identified that your land is burdened by a restrictive covenant and for the purposes of this article the covenant in question will be that only one residential building can be erected on the land. What do you do next?

    Wills, Trusts and Probate

    Why is having a will so important?

    It is entirely up to you if and when you want to create a Will, but it is important to be aware of the consequences of not having a Will.

    Award winning legal advice

    We are solicitors in Camberley, Wokingham and London. In 2019, Herrington Carmichael won ‘Property Law Firm of the Year’ at the Thames Valley Business Magazines Property Awards, ‘Best Medium Sized Business’ at the Surrey Heath Business Awards and we were named IR Global’s ‘Member of the Year’. We are ranked as a Leading Firm 2020 by Legal 500 and Alistair McArthur is ranked in Chambers 2020.


    60 St Martins Lane, Covent Garden, London WC2N 4JS 

    +44 (0) 203 755 0557



    Building 2  Watchmoor Park, Riverside Way, Camberley, Surrey  GU15 3YL

    +44 (0)1276 686 222


    Wokingham (Appointment only)

    4 The Courtyard, Denmark Street, Wokingham, Berkshire RG40 2AZ

    +44 (0)118 977 4045


    © 2021 Herrington Carmichael LLP. Registered in England and Wales company number OC322293.

    Herrington Carmichael LLP is authorised and regulated by the Solicitors Regulation Authority.

    Privacy Policy   |   Legal Notices, T&Cs, Complaints Resolution   |   Cookies

    Client Feedback   |   Diversity Data