Total spin-off of an entity with real estate

The DGT declares that the total spin-off of an entity separating part of the properties with encumbrances from the rest of the properties in order to dissociate part of the assets from the risks of the commercial activity is considered a valid economic reason.

An entity belonging to a commercial distribution group is responsible for the acquisition and development of business premises and their lease to the rest of the group’s companies.

Since this is the company where the group’s savings are accumulated and part of the properties are mortgaged, a total proportional spin-off is proposed, in which a newly created company would receive properties free of mortgage encumbrances, and another newly created company would receive the remaining properties, including some free of encumbrances.

If the proposed transaction is carried out in the commercial sphere under the provisions of the regulations on structural modifications of commercial companies (Law 3/2009 art.68 s.), it would meet the conditions established in the IS regulations to be considered as a total spin-off transaction, provided that the transaction has valid economic reasons, i.e. it does not have tax fraud or tax evasion as its main purpose.

In the specific case, the following reasons are indicated:

-Separate part of the real estate so that it is not liable for the debts owed to the banks that are financing the real estate activity. Not all the unencumbered real estate is separated because it is possible that the financial institutions would object, forcing them to grant new guarantees or cancel financing operations.

-That the newly created company that receives the unencumbered real estate does not guarantee financing operations of the companies of the commercial group and can apply a more conservative management policy, reducing the level of risk, in order to ensure the conservation of such assets as savings of the family group.

-The DGT understands that these reasons could be considered valid.