Kirkland Alert Kirkland & Ellis LLP

Avoiding Underfunded Spin-Offs

A recent judicial decision confirms that directors and managers should carefully construct corporate spin-off transactions that have the effect of shielding, in whole or in part, a parent company from liabilities transferred to the spun-off company. While a carefully executed spin-off can unlock tremendous value for a corporation, an underfunded spin-off may be economically unwound in bankruptcy