1. Demerger must be approved by the National Company Law Tribunal (NCLT) under Sections 230–232 of the Companies Act, 2013.

2. A detailed scheme must be prepared outlining how assets, liabilities, and shares will be divided between the companies.

3. Approval from majority shareholders and creditors is required through meetings directed by the NCLT.

4. A demerger that qualifies under Section 2(19AA) of the Income Tax Act can be tax-neutral. Otherwise, it may attract capital gains tax and other liabilities.

5. Assets and liabilities related to the demerged unit are transferred to the resulting company by operation of law once approved.

6. Pending legal cases may continue against the resulting company if related to the transferred undertaking.

7. Employees are usually transferred to the resulting company on existing terms, but formal communication and consent may be required.

8. There is a need to file the approved scheme with the Registrar of Companies (ROC) and seek approvals from SEBI, stock exchanges, and tax authorities, if applicable.

9. May involve issue of new shares, cancellation of old shares, or adjustments in share capital.

10. Contracts and licenses may need to be re-executed or assigned to the resulting company, depending on their terms.

A demerger refers to the separation of a business unit or division from a company to form a new independent entity. Under Indian law, a demerger is primarily governed by the Companies Act, 2013 (Sections 230 to 232) and has various legal, financial, and regulatory implications.

Legally, a demerger requires the preparation of a detailed scheme of arrangement, which must be approved by the National Company Law Tribunal (NCLT). The process involves obtaining the consent of shareholders and creditors through meetings directed by the NCLT. Once the scheme is sanctioned, the assets, liabilities, contracts, and employees of the demerged unit are transferred to the resulting company by operation of law.

One key legal implication is that the resulting company becomes liable for the obligations of the demerged undertaking as per the terms of the approved scheme. Contracts and licenses may need to be novated, and regulatory approvals (such as from SEBI, RBI, or sectoral regulators) may also be required depending on the nature of the business.

From a tax perspective, if the demerger satisfies conditions under Section 2(19AA) of the Income Tax Act, 1961, it is treated as tax neutral, meaning no capital gains tax is levied on the transfer of assets. However, failing to meet these conditions can attract tax liabilities.

In conclusion, a demerger carries significant legal implications, including NCLT approval, statutory filings, creditor and shareholder protection, contractual restructuring, and compliance with tax and regulatory requirements. It must be carefully structured to ensure legal validity and business continuity.

A demerger, which involves dividing a company into separate entities, has significant legal implications. These include navigating regulatory approvals, updating registrations (like GST), and addressing potential tax consequences, including capital gains tax exemptions under specific circumstances. The process also involves ensuring proper asset transfers, addressing liabilities, and potentially dealing with legal disputes arising from the demerger.