U.S. Securities Law and Federal Income Tax Considerations in Spin-Offs by Non-U.S. Companies

July 26, 2023

Spin-offs have grown in popularity again in recent years as a means of creating and maximizing shareholder value, accelerating growth, and increasing management focus on a specific line of business.

Recent years have witnessed completed or announced spin-offs in various sectors spanning healthcare, media, real estate, technology, energy, and even professional services. According to Refinitiv data, 145 spin-offs were announced in each of 2021 and 2022, the highest since 2015, with the majority of spin-offs in the past decade being announced by companies in the technology, industrials, financial and materials sectors.

Executing spin-off transactions can be very complex from an operational as well as legal perspective. Careful advance planning is therefore essential for the successful and timely execution of a spin-off.

This article explores selected U.S. securities law and federal income tax considerations that should be considered early in the process by non-U.S. companies to ensure that the spin-off is completed as efficiently and seamlessly as possible.