Demerger of Trust — Splitting Corpus and Liability Fairly.
When a business unit is demerged into a separate company, its share of the gratuity trust's corpus and liability needs to move with it — actuarially assessed, not just estimated.
Contact UsWhen a company demerges a business unit into a separate resulting company, the employees transferring to the resulting company typically carry their accrued gratuity liability with them — and if the original company's gratuity trust was funded for the whole workforce, the resulting company's proportionate share of the trust corpus needs to be carved out and transferred, usually into a newly established trust for the resulting company.
This requires an actuarial split — determining, as of the demerger's effective date, the present value of accrued gratuity liability specifically attributable to the transferring employees, so the corpus transferred matches that liability rather than an arbitrary headcount-based estimate. Under-transferring leaves the resulting company's new trust underfunded from day one; over-transferring leaves the remaining (demerged) company's trust short.
We coordinate the actuarial split, draft the demerger-related trust documentation (a deed transferring the identified corpus, and typically a fresh trust deed and Income Tax approval application for the resulting company), and reconcile employee-level records so the transferring workforce's liability history carries over accurately.
Our Demerger Services
Demerger Trust Impact Assessment
Assessing which employees and corresponding gratuity liability move to the resulting company under the demerger.
Actuarial Split Coordination
Coordinating an actuarial valuation specifically identifying the liability attributable to transferring employees as of the effective date.
Corpus Transfer Deed Drafting
Drafting the deed transferring the identified proportionate corpus from the original trust to the resulting company's trust.
Fresh Trust Setup for Resulting Company
Setting up a new gratuity trust for the resulting company, including deed drafting and Income Tax approval application.
Original Trust Corpus Reconciliation
Confirming the remaining (demerged) company's trust corpus is correctly adjusted after the transfer.
Employee Liability Record Migration
Ensuring individual employee gratuity liability and service history migrate accurately to the resulting company's trust.
Insurer/Funding Policy Split Coordination
Coordinating with the insurer to split or establish a new funding policy reflecting the demerger.
Regulatory Filing Alignment
Aligning the trust-level demerger documentation timeline with the corporate demerger scheme's regulatory approvals.
Our Process
Employee & Liability Mapping
We identify which employees transfer to the resulting company and map their accrued gratuity liability.
Actuarial Split Valuation
A dedicated actuarial exercise determines the present value of liability attributable to the transferring workforce.
Corpus Transfer Documentation
A deed is drafted transferring the actuarially determined proportionate corpus to the resulting company's trust.
Resulting Company Trust Setup
A new trust is established for the resulting company, including Income Tax approval application where not already in place.
Reconciliation & Sign-Off
Both trusts' post-demerger corpus positions are reconciled and confirmed against the actuarial split.
Why It Matters
Frequently Asked Questions
Demerging a business unit with gratuity trust exposure?
We'll coordinate the actuarial split and set up the resulting company's trust so neither side starts underfunded.
