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Demerger with Spin-off: The Two Cornerstones of the Italian Civil Law Reform

published on 1 July 2025 | reading time approx. 4 minutes

Legislative Decree no. 88/2025 – which supplements Legislative Decree no. 19/2023 implementing Directive (EU) 2019/2121 on cross-border conversions, mergers and demergers – amends and clarifies the legal framework governing demergers with spin-offs, an instrument recently introduced into the Italian legal system through the latest company law reform.

This reform, with systemic implications, focuses on two fundamental civil law innovations which have tax consequences:

the possibility of carrying out a spin-off in favour of pre-existing companies;
the admissibility of a full demerger with spin-off, involving the entire assets of the demerged company.

First Key Innovation: Spin-off also in favour of Pre-existing Companies

The previous wording of Article 2506.1 of the Italian Civil Code seemed to suggest that the beneficiary companies in a demerger with a spin-off had to be newly incorporated companies.

Legislative Decree no. 88/2025 explicitly amends the provision, removing any doubts as to interpretation and clearly stating that the demerged company may also assign assets to pre-existing companies, not only to newly formed ones.

The new wording of Article 2506.1 reads as follows: “through a demerger with spin-off, a company assigns all or part of its assets to one or more pre-existing or newly incorporated companies and receives in exchange the relevant shares or quotas, which are allocated to itself.”

This amendment enhances the flexibility of the instrument, facilitating intragroup reorganisations, including family businesses, without the need to set up new companies.

However, it should be noted that the procedural simplifications provided under Articles 2506-bis(4) and 2506-ter(3) of the Italian Civil Code, which include the exemption from preparing the Balance Sheet pursuant to Article 2501-quater, as well as the exemption from drawing up expert reports required under Articles 2501-quinquies ff. – apply only if:

the spin-off is carried out in favour of newly incorporated companies;
all the shares or quotas of the beneficiaries must be allocated exclusively to the demerged company.

This limitation is expressly provided in Article 2506-bis, paragraph 4 of the Italian Civil Code, as amended by Legislative Decree no. 88/2025, which makes the applicability of the simplified regime conditional upon the concurrent fulfilment of both above requirements.

In the event of a spin-off involving pre-existing companies, a complete demerger plan must be prepared. This plan should include a Balance Sheet drawn up in accordance with Article 2501-quater, an expert report, and supporting documentation. This is particularly important when the share exchange ratio is not automatic (e.g., when the beneficiary is not wholly owned by the demerged company).

Second Key Innovation: Full Demerger with Spin-off

A further operational issue concerned the admissibility of a demerger with spin-off involving the entire assets of the demerged company, effectively amounting to a full demerger with spin-off.

In the absence of an explicit provision, the prevailing academic doctrine (see Triveneto Notarial Committee, Maxima L.G.1) treated the spin-off as necessarily partial, particularly due to the previous wording stating that the demerged company “continues its activity”.

Legislative Decree no. 88/2025 has now clarified the issue by stating that the entire assets and liabilities of the demerged company can be transferred in a spin-off. In such cases, the demerged company does not cease to exist (as would happen in a traditional full demerger), but continues to exist as a pure holding company, with a Balance Sheet consisting solely of the shareholding in the beneficiary company.

This civil law recognition of a full demerger with spin-off significantly broadens the potential applications of the instrument, making it an effective tool for comprehensive reorganisations, including succession planning and M&A transactions.

Shareholders’ Rights: The New Withdrawal Regime

The substantive amendments are accompanied by the reform of Article 2506-ter(6) of the Italian Civil Code, which now explicitly states that a shareholder of a demerged company is not entitled to exercise the right of withdrawal solely by reason of the spin-off, even if the shareholder did not consent to the operation.

This replaces the previous general wording and aligns with the principle that the shares in the beneficiary company are assigned to the demerged company, not to its shareholders – thus making any individual shareholder dissent legally irrelevant.

However, a shareholder retains the right to bring an action for liability pursuant to Article 2476 of the Italian Civil Code in the event of depletion of their shares’ values, where the demerger with spin-off forms part of a broader corporate operation.

Conclusions

With the amendments introduced by Legislative Decree no. 88/2025, the demerger with spin-off instrument gains in clarity and practical applicability, confirming its role as an autonomous and increasingly versatile reorganisation tool.

The extension to pre-existing companies and the admissibility of full demergers serve to consolidate the usefulness of the instrument in complex scenarios. However, it is imperative to exercise caution and adhere to procedural requirements and tax implications, particularly in light of the tax neutrality principle laid down in Article 173(15-ter) of the Consolidated Income Tax Act (TUIR).