Companies Act 19,550 · Article 88 — Spin-off: concept and types

Corporate spin-off: separating the estate (LGS art. 88)

Article 88 of the General Companies Law governs the spin-off: the transaction by which a company allocates part of its estate to another company (existing or new) or divides into several companies. It provides three forms and requires a corporate resolution, special financial statements, allocation of equity interests to members, publication and creditors’ right to object.

Source: Act 19,550

What article 88

Article 88 defines the types of spin-off and their requirements: it is the mechanism for dividing or separating a company’s estate.

Official text · Act 19,550, art. 88

A spin-off occurs when: I. A company, without dissolving, allocates part of its estate to merge with existing companies or to participate with them in creating a new company;

II. A company, without dissolving, allocates part of its estate to form one or more new companies;

III. A company dissolves without liquidation in order to form new companies with the entirety of its estate.

Source: Law 19,550, art. 88 — InfoLEG (updated official text)

Commentary

A spin-off is, in a sense, the inverse of a merger: instead of concentrating assets, it separates them. Type II—a company allocating part of its estate to create another company—is the most common (for example, to separate business units or prepare a sale).

The requirements detailed by the provision include an approving corporate resolution, special spin-off financial statements dated no more than three months earlier, allocation of interests in the recipient company to the members of the transferring company in proportion to their holdings, publication of a notice for three days and the creditors’ right to object under the merger rules. Withdrawal rights and preferences are governed by articles 78 and 79.

Distinctions often confused

Spin-off (art. 88) is not the same as Merger (art. 82). A spin-off separates part of an estate into another company; a merger concentrates the estates of two or more companies in one.

Spin-off without dissolution is not the same as Spin-off with dissolution. Under types I and II the transferring company survives; under type III it dissolves without liquidation to form new companies with its entire estate.

Practical impact

Spin-offs are commonly used to reorganize groups, separate business units or prepare a sale. They require planning the special financial statements, allocation of equity interests, publication and creditors’ objection rights.

Frequently asked questions

What is a corporate spin-off?

It is a transaction in which a company allocates part of its estate to another company (existing or new) or divides into several companies, with or without dissolution depending on the form.

Can creditors object to a spin-off?

Yes. They have an objection right under the merger rules, and the publication and special financial statements required by article 88 must be completed.

This page is informational and does not constitute legal advice nor replace professional consultation. It quotes the official text of the rule; for its application to a specific case, consult a licensed professional.

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