A demerger (scission) in France is a restructuring operation by which a company (the demerged company) transfers its entire assets and liabilities to two or more existing or newly incorporated companies (beneficiary companies) and is dissolved without liquidation. Shareholders of the demerged company receive shares in the beneficiary companies in proportion to their rights. It is governed by Articles L. 236-1 to L. 236-24 of the French Commercial Code and benefits from a tax-neutral regime (no immediate capital gain at the company level) when the statutory conditions are met under Article 210 A of the French General Tax Code.

A partial demerger (scission partielle) transfers only a branch of activity — the demerged company survives with its remaining activities. In this case, it is equivalent to an apport partiel d'actif. A full demerger dissolves the demerged company entirely. The demerger-exchange is the most common form in group carve-outs: the parent company demerges a subsidiary directly in favor of its shareholders, distributing the subsidiary's shares — a tax-efficient way to separate group activities into independently owned entities.

The tax neutrality conditions are: each beneficiary company must have a genuine activity of its own (no pure holding shell), the split must be economically real (not an artificial tax avoidance), and each branch of activity transferred must be complete and self-standing. Failure to meet these conditions results in the demerger being treated as a taxable distribution to shareholders. The Swiss equivalent is the scission governed by the Merger Act (LFus, Articles 29 et seq.) in the forms of Aufspaltung (full split with dissolution) and Abspaltung (partial split, demerged company survives).

At Hectelion, we value business branches in French demergers and advise on the tax structuring of Franco-Swiss demerger transactions in our M&A advisory mandates.