A demerger is a corporate restructuring process where a company splits into two or more independent entities. This is typically done to enhance operational efficiency, unlock shareholder value, or focus on core business areas.

The process begins with the board of directors drafting a demerger plan, outlining the terms and rationale. The plan is then presented to shareholders and creditors for approval through a general meeting. Once approved, the company files the demerger scheme with the National Company Law Tribunal (NCLT).

The NCLT reviews the scheme and, if satisfied, grants its approval. Following this, the company must file the NCLT order with the Registrar of Companies (ROC) to make the demerger effective. The resulting entities update their legal and financial records, ensuring compliance with statutory requirements.

Demergers allow each new entity to operate independently, focusing on their specific business objectives, which can lead to improved management, increased shareholder value, and enhanced strategic focus.