What is a corporate spin-off?

A corporate spin-off is when a parent company divides into two or more separate companies. Investors may receive stock in the newly formed company, which can then be traded on the market. The spin-off company operates independently from the parent company, and each company is responsible for its own liabilities. Generally, a spin-off is used to unbundle parts of a larger business, allowing each new company to focus on its respective market. In Maryland, corporate spin-offs are approved by the corporate governance commission, which is responsible for ensuring that any new business complies with all applicable laws and regulations. The commission also works to ensure that the spin-off company is sufficiently funded and that the new company’s management has the necessary skills to take the company forward. If the newly formed company is publicly traded, then the commission will also review the prospectus and approve all associated documents before the stock can be issued and traded on the market. A spin-off is not the same as a merger, in which two companies join together to become one. An example of a spin-off would be when the food giant Kraft separated from Mondelez International, with Kraft focusing on its packaged food business and Mondelez focusing on the confectionary and snack food side of the business.

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What is a corporate spin-off?

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