Sweet Split: NCLT Clears HUL’s Scoop into Independent Kwality Wall’s Entity

Sweet Split: NCLT Clears HUL’s Scoop into Independent Kwality Wall’s Entity

Introduction

The National Company Law Tribunal (NCLT), Mumbai Bench, has approved the demerger of Hindustan Unilever Limited’s (HUL) ice cream business into its wholly owned subsidiary, Kwality Wall’s (India) Limited. The move marks a significant step in HUL’s corporate restructuring aligned with Unilever PLC’s global strategy to create a standalone ice cream entity.

Factual Background

HUL, one of India’s largest FMCG companies, operates a diverse portfolio that includes a thriving ice cream segment under brands such as Kwality Wall’s, Cornetto, and Magnum. As part of Unilever PLC’s global business restructuring, the company proposed to demerge its ice cream operations into Kwality Wall’s (India) Limited, with the intent to list the new entity independently. Under the scheme, each shareholder of HUL will receive one fully paid equity share of Kwality Wall’s for every one share held in HUL, allowing them to retain ownership in both companies.

Procedural Background

The scheme of arrangement was filed before the NCLT, Mumbai Bench, under Sections 230 to 232 of the Companies Act, 2013. After examining compliance with all statutory requirements, stakeholder consents, and regulatory approvals, the Bench comprising Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar sanctioned the demerger scheme. The appointed date for the demerger shall be the first day of the month following the fulfillment of all conditions stipulated in the scheme.

Issues

1.  Whether the proposed demerger satisfies the requirements under Sections 230–232 of the Companies Act, 2013.
2.  Whether the interests of shareholders, creditors, and employees are adequately protected under the scheme.
3.  Whether the transfer of liabilities to Kwality Wall’s (India) Limited complies with statutory and financial obligations.

Contentions of Parties

Applicant : Senior Advocate Gaurav Joshi, assisted by Advocates Tapan Deshpande and Aekaanth Nair, submitted that the demerger will enhance shareholder value by unlocking the potential of the high-growth ice cream segment. They emphasized that both companies have secured creditor and employee consents, complied with accounting and tax regulations, and obtained approvals from relevant stock exchanges.

Reasoning and Analysis

The bench of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar observed that the proposed demerger was in compliance with statutory requirements and that all necessary approvals from stakeholders had been obtained. The tribunal noted that the creation of an independent listed entity aligns with Unilever’s global restructuring strategy and serves the best interests of shareholders by allowing focused business growth.

Furthermore, it was held that, “All liabilities and claims related to the ice cream business shall be transferred to Kwality Wall’s (India) Limited, ensuring a clean separation of financial obligations.” The net worth and shareholding structure post-demerger remain equitable, as shareholders continue to hold their HUL shares while receiving equivalent shares in the new company. The tribunal also directed both entities to file the sanctioned scheme with the Registrar of Companies within 30 days and with Stamp Authorities within 60 days to complete procedural formalities.

Implications

The demerger signals a strategic move by HUL to unlock value in its fast-growing ice cream segment and allow independent market performance of the new entity. The decision also reinforces the NCLT’s role in facilitating corporate reorganizations that align with shareholder interests while maintaining compliance safeguards for creditors and employees.