When a company creates a new independent company by selling or distributing new shares of its existing business, this is called a spinoff. A spinoff is a type of divestiture. A company creates a spinoff expecting that it will be worth more as an independent entitity. A spinoff is also known as a spin out or starbust.

The new company resulting from this corporate action is known as the company spun-off. The company spun-off acquires its assets, employees, and other resources from the parent company. A spin-off is a mandatory corporate action. In a mandatory corporate action, the board takes the decision and the shareholders are not permitted to vote.