Confianz

Etiqueta: due diligence

  • How company spin-off are managed

    Understanding how to manage company spin-offs requires distinguishing between a full spin-off, a partial spin-off and a segregation. A full spin-off divides all assets into several companies and extinguishes the original company. Partial spin-off transfers an economic unit to another created or existing one, without extinguishing the original one. Segregation is similar to partial segregation but involves a more specific transfer of assets.

    First the spin-off project is prepared: it identifies the companies involved, assets, liabilities, valuations, spin-off balance sheet, exchange fees and accounting effect date. It also defines special rights and examines how they fit into the tax neutrality regime. The existence of an «economic unit» is key to the partial spin-off.

    2 Legal approval and tax neutrality

    Once the project has been drafted, an independent expert’s report is required if a company is a public limited company. A shareholders’ meeting is then convened for approval. If approved unanimously, the resolution is published in the BORME or provincial newspaper.

    It is then notarised and registered in the Mercantile Register. It is also communicated to employees and creditors who may be affected.

    In order to qualify for the tax neutrality regime, it must have a valid economic rationale and comply with corporate income tax requirements. This regime does not allow latent income from tax-value differences to be included.

    3 How company spin-off are managed, operational effects and monitoring

    After registration, tax and labour formalities are carried out. The spun-off company is deregistered with the tax and social security authorities and the beneficiaries are deregistered and registered as appropriate.

    The new balance sheets and accounting records must also be incorporated. The spin-off balance sheet may differ from the last approved balance sheet and include adjustments for real value. However, its contestation does not suspend the spin-off.

    Operationally, it is essential to plan the transition. Confianz facilitates integration between separate units, defines governance structures, independent systems and technological supports. This ensures operational continuity and avoids duplication.

    What we do at Confianz

    • Strategic design of the spin-off project with identification of business units, valuations and operational objectives.
    • Fiscal neutrality management, verifying economic purpose, avoiding tax risks and guaranteeing access to the FEAC regime.
    • Legal and vocal coordination: expert reports, meetings, public deeds, registration and official announcements.
    • Internal and external communication plan, informing employees, creditors and affected parties, managing expectations.
    • Operational implementation, with separation of functions, technology and accounting appropriate for each new company.
    • Post-decision monitoring, to verify tax and legal compliance, ensuring the effectiveness of the new business model.

    At Confianz we design and execute each step, with a practical and human approach, facilitating a business transformation that brings stability and value. If you need to structure a spin-off, we can help you do it with confidence and vision. In our restructuring playlist you can find more information on this topic.

  • What is an indemnity in M&A and how does it protect you?

    In any sale and purchase of a company, there is one element that can save the parties from a million-dollar problem: indemnity in M&A. Sound familiar? It’s time to get it right.

    What exactly does an indemnity cover in M&A?

    Imagine this: you are about to close a deal. You have done your due diligence, but you see a possible tax lawsuit. It hasn’t materialised yet, but alarm bells are ringing. In that scenario, an indemnity clause is not a suggestion: it’s your bulletproof vest. It obligates the seller to bear the cost if that problem is triggered after closing. Without it, that potential lawsuit can become your nightmare, legally and financially.

    Indemnities apply to known risks. We are not talking about vague promises like warranties, but precise guarantees: if X happens, you pay.

    Typical examples:

    • Ongoing litigation
    • Fines for tax inspections in process
    • Outstanding labour debts

    The key is to put it in writing. Because if you know it and you don’t agree to it, you won’t be able to claim. It’s that simple. It’s that dangerous.

    Indemnities vs Civil Code

    This is where the second level of the game comes in: the Civil Code. Article 1484 states that the seller is liable for hidden defects. But beware: if the buyer knows about them, there is no longer any liability. In the M&A world, this is not always the case. That is why sandbagging clauses exist. What do they do? They allow you to claim even if you were already aware of the problem, as long as the seller has concealed it or lied about it in his statements.

    But is that legal in Spain? It depends. Some courts validate them on the grounds of contractual autonomy. Others do not, considering them contrary to mandatory rules. What is clear is this: if you don’t talk about it and don’t agree to it, you lose. This is why it is often decided to directly exclude the application of the Civil Code. But this is not a minor decision. Because in doing so, it also removes its protections. It can be a double-edged sword.

    At Confianz we evaluate each case. It’s not about filling a contract with meaningless clauses. It’s about designing an agreement that works, that holds up and that defends you. We also help to set clear limits: what risks are covered, for how long, with what economic ceiling and under what conditions. Because a poorly negotiated indemnity can be a dead letter.

    How we approach it at Confianz

    At Confianz we do not use templates. Each operation has its own edges, risks and urgencies. And indemnities are too important to improvise. Our approach:

    • We take a closer look at due diligence
    • We detect real risks, not assumed risks
    • We design clauses that make both legal and practical sense.
    • We negotiate without fear and with substance

    We know that a badly drafted clause can cost millions. And we also know that negotiations are often avoided so as not to «strain» the relationship. We say the opposite: you have to tighten it where it is needed, so that it does not break later. Moreover, we help to filter out what is reasonable. Because not everything should be covered by indemnity. They can be limited to clear cases: malice, blatant errors or known but unresolved facts. This protects the buyer, without suffocating the seller.

    That is why we say that indemnities are not small print. They are the heart of the contract. And if they are badly done, there is no turning back.

    An indemnity in M&A is not just a legal formality. It is your life insurance in a complex transaction. It may sound like a technicality, but it is not. If you are in the middle of an M&A transaction or about to enter into one, don’t jump in without it in place. A clear indemnity can save you years of litigation and headaches.

    At Confianz, we have been fine-tuning these clauses for years. Not with theory, but with practice. Real cases. Real people. Real risks. Are you buying or selling a company? Let’s talk.