Third-Party Liability Arising From A Corporate Spin-off

Summary: The spin-off of a business division — a frequent phenomenon in modern corporate practice, especially due to its tax advantages — constitutes a form of corporate transformation and, more specifically, one of the three legally recognized forms of demerger (full demerger, partial demerger, and division spin-off). This article focuses on the liability towards creditors and third parties borne by both the company effecting the spin-off by transferring a division of its business activity ("demerging entity"), and the company receiving the division ("beneficiary entity").

1. Introduction – Basic Features of the Division Spin-off

The division spin-off, as a specific form of demerger, was first explicitly introduced by Law 4601/2019. Until then, it functioned as an atypical, jurisprudentially constructed transformation. Its key features are the following: