what is the transfer of all or a portion of a subsidiary stock

by Moises Stehr PhD Published 3 years ago Updated 2 years ago

When does a corporation transfer assets to a wholly owned subsidiary?

Except as provided in paragraph (b)(3)(i) of this section, if, immediately after a transfer of stock of a subsidiary that has a basis that exceeds its value, the subsidiary remains a member of the group, then the basis in each share of subsidiary stock owned by each member of the group shall be redetermined in accordance with the provisions of this paragraph (b)(1) immediately before …

What is transfer of subsidiary stock and deconsolidations of subsidiaries?

Jun 22, 2019 · This is called a SPINOFF. Spinoff is a situation where in a portion or all subsidiary stocks or assets is being transferred to the stockholders of the parent company is being given in a pro-rated basis. In spinoff, it also shows a creation of a new company from sale of stocks of the parent company. Thanks The correct answer was given: Brain

What is a subsidiary?

How much stock does a parent company own of a subsidiary?

Mar 31, 2020 · SoftBank Group Corp. (“SBG”) announced today that it decided to transfer 240,000,000 shares (plan), a portion of 3,182,919,470 shares of common stock of its subsidiary SoftBank Corp. (the “Transfer”) which it holds through its wholly owned subsidiary SoftBank Group Japan Corporation (“SBGJ”). 1. Purpose of the Transfer

Which of the following is the transfer of all or a portion of a subsidiary's stock?

A corporate split-off is the process whereby a parent corporation organizes a subsidiary corporation to which it transfers part of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the shareholders of the parent corporation in exchange for a portion of their parent ...

What is sell off and spin off?

Usually, a spin-off has no tax consequences for the divesting firm which treats the newly created shares as a stock dividend to its existing shareholders. On the other hand, in a sell-off a certain asset of the divesting firm is sold off for cash or securities to another firm or entity.

What is a spin off transaction?

More Definitions of Spin-Off Transaction Spin-Off Transaction means, any transaction in which assets of the Company are transferred or sold to a company or corporate entity in which the Shareholders hold equal stakes, pro-rata to their ownership of the Company.

What is a spin off example?

Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs. For example, a company might spin off one of its mature business units that are experiencing little or no growth so it can focus on a product or service with higher growth prospects.

What is a split-off?

A split-off is a corporate reorganization method in which a parent company divests a business unit using specific structured terms. There can be several methods for structuring a divestiture. Split-offs, spinoffs, and carveouts are a few options, each with its own structuring.

WHAT IS curve out?

What Is a Carve-Out? A carve-out is the partial divestiture of a business unit in which a parent company sells a minority interest of a subsidiary to outside investors.

What is the difference between spin-off and split-off?

A spin-off distributes shares of the new subsidiary to existing shareholders. A split-off offers shares in the new subsidiary to shareholders but they have to choose between the subsidiary and the parent company.

How do stock spinoffs work?

In a "spin-off," a parent company distributes shares of a subsidiary to the parent company's shareholders so that the subsidiary becomes a separate, independent company. The shares are usually distributed on a pro rata basis.

What happens when a company is spun-off?

A spinoff is when a company takes a portion of its operations and breaks it off into a separate entity. In a spinoff, shares of the new company are distributed tax-free to shareholders of the parent company. Companies spin off portions of their operations for several reasons.

When a company spins off a subsidiary A new company is created?

A spinoff is otherwise called a spin-out or a starburst. When a new company is created from an old one, it runs independently rather than being a subsidiary of a parent company. When a company spins off a new and independent company, it means it splits off one of its sections as a separate business.

Why do companies do spin offs?

Unlocking shareholder value: Perhaps the biggest factor driving spinoffs is the idea that the parent company is undervalued — perhaps because of management or strategy issues described above — and that its remaining business valuation would be higher if it spun off one or more business units.Aug 8, 2016

Why do companies do split offs?

In a split-off, the parent company gives a tender offer to its shareholders to exchange their shares for new shares of a subsidiary. The tender offer usually gives a premium to encourage existing shareholders to go for the offer. This privilege of “premium” tells why split-offs typically end up being oversubscribed.

1. Purpose of the Transfer

As announced in “ SoftBank Announces JPY 4.5 trillion (USD 41 billion) Program to Repurchase Shares and Reduce Debt ” dated March 23, 2020 (the “Announcement”), SBG intends to sell or monetize up to JPY 4.5 trillion of assets held by it over the four quarters following the Announcement. The Transfer is being made as a part of this program.

4. Outlook

The number of shares to be transferred and transfer price for the Transfer is scheduled to be announced as soon as the purchase agreement is executed. The closing of the sale is scheduled for May 26, 2020. The shares subject to the Transfer are scheduled to be resold through securities companies.

5. Impact on Consolidated Financial Results

As SoftBank Corp. will continue to be a subsidiary of SBG after the Transfer, the amount equivalent to the gain on sale (after taxation) from the Transfer will be recorded as additional paid-in capital in the consolidated statement of financial position.

What is Section 351A?

Section 351(a) provides that no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in § 368(c)) of the corporation.

What is the transfer of assets to the first corporation?

transfer of assets to the first corporation in exchange for an amount of stock in the first corporation constituting control satisfies the control requirement of § 351 even if, pursuant to a binding agreement entered into by the transferor with a third party prior to the exchange, the transferor transfers the stock of the first corporation to the second corporation simultaneously with the transfer of assets by the third party to the second corporation, and immediately thereafter, the transferor and the third party are in control of the second corporation.

What is Sec. 304?

304 is an anti - abuse provision designed to prevent avoidance of dividend treatment by controlling shareholders that withdraw money from their corporate subsidiaries by selling stock of one subsidiary to another affiliate company in exchange for cash, promissory notes, or other property. Before the enactment of Sec. 304, shareholders could receive corporate funds from the acquiring subsidiary with the benefit of a lower taxable base (i.e., the ability to reduce the taxable portion of the proceeds by their basis in the stock transferred) and a lower tax rate (in the form of the capital gains rate instead of the dividends rate). The latter incentive—a lower capital gains rate—was eliminated for individual shareholders with the Jobs and Growth Tax Relief Reconciliation Act of 2003, P.L. 108 - 27, which provided for a qualified dividend rate matching the long - term capital gains rate. On the other hand, corporate shareholders do not receive a preferred rate for capital gains.

Who is Mark Heroux?

Editor: Mark Heroux, J.D. As implementation of the Organisation for Economic Co - operation and Development's guidelines on cross - border taxation moves forward and legislation is enacted in many countries, multinational groups are reevaluating their holding structures.

What is a dividend in a 301?

Under the general rules of Sec. 301, a shareholder recognizes a dividend to the extent a distribution is paid out of corporate E&P. In the fictional scheme of a Sec. 304 transaction, a dividend can be traced to the E&P of both the acquiring corporation and the target corporation (Sec. 304 (b) (2)). In general, in determining the amount and the source of the dividend, the distribution is treated as made first out of the E&P of the acquiring corporation and then out of the E&P of the target.

Why do companies have subsidiaries?

A parent company buys or establishes a subsidiary to provide the parent with specific synergies, such as increased tax benefits, diversified risk, or assets in the form of earnings, equipment, or property. Still, subsidiaries are separate and distinct legal entities from their parent companies, which reflects in the independence ...

What is subsidiary in business?

In the corporate world, a subsidiary is a company that belongs to another company, which is usually referred to as the parent company or the holding company . The parent holds a controlling interest in the subsidiary company, meaning it has or controls more than half of its stock. In cases where a subsidiary is 100% owned by another firm, ...

How much revenue did eBay generate in 2017?

For example, eBay reported total revenue on its consolidated income statement, for the year ended Dec. 31, 2017, totaling US$9.6 billion. The e-commerce firm notes in the annual report that the individual domestic and consolidated subsidiary, StubHub, generated revenue of $307 million .

Which companies are required to disclose significant subsidiaries under S-K?

Warren Buffett's Berkshire Hathaway Inc., for example, has a long and diverse list of subsidiary companies, including Dairy Queen, Clayton Homes, Business Wire, GEICO, and Helzberg Diamonds.

Who is James Chen?

Subsidiary. James Chen, CMT, is the former director of investing and trading content at Investopedia. He is an expert trader, investment adviser, and global market strategist. David Kindness is an accounting, tax and finance expert.

Can a majority owned subsidiary be consolidated?

The SEC states that only in rare cases, such as when a subsidiary is undergoing bankruptcy, should a majority-owned subsidiary not be consolidated. An unconsolidated subsidiary is a subsidiary with financials that are not included in its parent company's statements.

What is subsidiary financial statement?

A subsidiary usually prepares independent financial statements. Typically, these are sent to the parent, which will aggregate them—as it does financials from all its operations—and carry them on its consolidated financial statements. In contrast, an associate company's financials are not combined with the parents.

What is the difference between a wholly owned subsidiary and a wholly owned subsidiary?

The difference between a subsidiary and a wholly owned subsidiary is the amount of control held by the parent company. A parent company has a controlling interest in another company, which means it has majority ownership of that company and controls its operations.

Why do parent companies have subsidiaries?

Parent companies can benefit from owning subsidiaries because it can enable them to acquire and control companies that manufacture components needed for the production of their goods.

What is parent company?

The parent company is typically a larger business that often has control over more than one subsidiary. Parent companies may be more or less active concerning their subsidiaries, but they always hold a controlling interest to some degree. The amount of control the parent company chooses to exercise usually depends on the level ...

How much of a company's voting stock is controlled by another company?

A regular subsidiary company has over 50% of its voting stock (it can be half, plus one share more) controlled by another company, though, for liability, tax, and regulatory reasons, the subsidiary and parent companies remain separate legal entities. 1

What is a wholly owned subsidiary?

Wholly Owned Subsidiary Company. A subsidiary company is considered wholly owned when another company, the parent company, owns all of the common stock. 1 There are no minority shareholders. The subsidiary's stock is not traded publicly. But it remains an independent legal body, a corporation with its own organized framework and administration.

What are the advantages of a subsidiary?

In other instances, when entering a foreign market, a parent company may be better off by putting up a regular subsidiary than a wholly owned subsidiary. Local laws may set up ownership restrictions that make a wholly owned operation impossible. Even without legal barriers to entry , there may be other advantage s.

What are some examples of parent-subsidiary relationships?

One example of a parent-subsidiary relationship is CNN, which set up a subsidiary in the Philippines. CNN could not put up a wholly owned company in the Philippines because its constitution forbids total foreign ownership of any form of media. 2 The solution was to partner with the new owners of a TV station on the verge of closing. The new owners were well aware of the fierce competition in broadcast media in the country, which is dominated by two giants. The solution was to go for a fresh niche by rebranding itself as a local news network that served as a subsidiary of CNN . 3 4