Employee Benefits Issues In Spin-Offs

In a corporate spin-off, both the existing company and the new company (spinco) must consider the implications for employees, employee benefit plans and executive compensation arrangements.  Benefit plans and compensation arrangements can represent significant liabilities and responsibilities, and typically are expressly allocated in an employee matters agreement (EMA).  This article provides a brief summary of some of the key employee benefit plans issues to consider in a spin-off.

Separating Employees and Management

For most employees, it will be clear whether they are primarily related to the future profile of the parent company or of the spinco following the separation.  The EMA should carefully delineate the status of each employee or employee group.  For executives and management, particularly where existing managers have responsibilities that cover both the parent company and the spinco, the parent and the spinco should carefully consider their management