These broad requirements create three separate types of
divisive reorganizations.
Spin-offs, split-offs and split-ups.
To examine each type, assume West Indies Corporation is formed to facilitate
a corporate division by Sunchaser Shakery Corporation.
In a spin-off, West Indies is formed to receive some of Sunchaser's assets in
exchange for the stock of West Indies.
As the shareholder of Sunchaser,
Nicholas receives the West Indies stock without surrendering his Sunchaser stock.
In the end, two corporations now exist.
A split-off is somewhere to the spin-off just described, except Nicholas surrenders
his Sunchaser stock in exchange for the West Indies stock.
Thus once again, two corporations now exist.
Finally, in a split-up two or more corporations, West Indies and
Marley, are formed to receive substantially all the assets of Sunchaser.
The stock of West Indies and
Marley is exchanged for Sunchaser's stock which then liquidates.
This figure illustrates the two potential organizational structures after
a split-up.