disinvestment noun Definition, pictures, pronunciation and usage notes

Sometimes, as in Italian, it is reduced to s- (as in spend, splay, sport, sdain for disdain, and the surnames Spencer and Spence). Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

Agencies should understand the legal issues arising in the context of disinvestment (overviewed below and discussed further in the Crosscutting Legal Considerations section). The difference between disinvestment and divestment is nominal and appears to be one of scale. Disinvestment, meaning the sale of shares, can happen in small lots at any time to raise funds without losing control of the asset. Divestment or divestiture, on the other hand, usually refers to the sale of controlling shares. Disinvestment can affect the economy of the country in a positive way. A strong capital can be developed and it can be helpful in repaying debts.

Related Definitions

There are some fallacies in the policies that can lead to an increase in the fiscal deficit. In accordance with the views expressed by the experts, it is nearly impossible for private entities to emphasize equitable sharing of the resources and growth of all. Disinvestment from the Disinvestment Policy of India refers to the government or organization selling or liquidating assets or subsidiaries.

Both arguments assume a long time line and the necessity for cooperative effort by the divesting institutions. Reasons for divestment at the institutional level may be political, legal, financial, or ethical in nature. A company may respond to shareholder or consumer pressures and close down its operations in a country with a poor human rights record, doing so for financial and ethical reasons.

Divestitures & Divestments: Quick Guide

The proceeds from this disinvestment are then used to improve the company’s financial position by reducing its debt. One criticism of divestment focuses on the belief that institutional selling of a certain stock lowers its market value. Therefore, the company’s net worth becomes devalued and the owners of the company may lose substantial paper assets. In addition, institutional divestment may encourage other investors to sell their stocks for fear of lower prices, which in turn lowers prices even further. Finally, lower stock prices limits a corporation’s ability to sell a portion of their stocks in order to raise funds to expand the business.

Also, selling the shares that are making a profit can affect the revenue. Many conservatives opposed the disinvestment campaign, accusing its advocates of hypocrisy for not also proposing that the same sanctions be leveled on either the Soviet Union or the People’s Republic of China. Ronald Reagan, who was the President of the United States during the time the disinvestment movement was at its peak, also opposed it, instead favoring a policy of “constructive engagement” with the Pretoria regime. Some offered as an alternative to disinvestment the so-called “Sullivan Principles”, named after Reverend Leon Sullivan, an African-American clergyman who served on the Board of Directors of General Motors. These principles called for corporations doing business in South Africa to adhere to strict standards of non-discrimination in hiring and promotions, so as to set a positive example. The disinvestments are selling off the assets and pulling off the shares from the company to repay the debt and cater to the fiscal deficit.

Example Sentences

Organizations may decide on the disinvestment of holdings that no longer fit with their social, environmental, or philosophical positions. For example, the Rockefeller Family Foundation, which derived its wealth from oil, divested its energy holdings in 2016 due to false statements from oil companies regarding global warming. Some religious organizations have also viewed divestment as a moral obligation. In 2014 the General Assembly voted in favour of divesting from three major U.S. corporations that conducted business in Israel. These examples illustrate how disinvestment can occur for various reasons, such as financial considerations or ethical concerns.

• The importance of disinvestments lies in surging social programs such as health care and education.
• The main types of disinvestment policies are minority and majority disinvestments.
• A strong capital can be developed and it can be helpful in repaying debts.
• Disinvestment can take the form of divestment or a decrease in capital expenditures.

The aspirants preparing for the UPSC exam must have an in-depth knowledge of these topics in order to grasp the core concepts. The formula for performing exceptionally well in the exam roots from the preparation of the basic topics. The disinvestment, DIPAM, and disinvestment policy hold enormous importance for the candidates to rank well in the UPSC exam. Several states and localities did pass legislation ordering the sale of such securities, most notably the city of San Francisco.

Trends of disinvestment

This can help organizations in financial distress to avoid bankruptcy. Generally speaking, we think of mergers and acquisitions as concerned with making a deal to buy or merge with another company. Divestments, on the other hand, involve the act of selling or disposal.

Meaning of disinvestment is the action of the government to dissolve the shareholders in the public sector. The funds attained from the disinvestment will assist in more purveying of the public sector enterprises. The major objectives of the disinvestments are to lower the financial burden and to surge and uplift public finances. Disinvestment is the accounting profit process through which governments and organizations sell assets and subsidiaries. The term ‘disinvestment’ (or ‘divestment’) is used to describe this process whether or not 100% of the asset or subsidiary is sold. Even if the party in question was only selling a stake of an asset or subsidiary, the transaction would be considered a disinvestment.

Who introduced the Disinvestment Policy in India?

After the disinvestment, the company could allocate both the sales proceeds and recurring capital expenditures to the industrial division to maximize its ROI. Disinvestments, in most cases, are primarily motivated by the optimization of resources to deliver maximum returns. To achieve this objective, disinvestment may take the form of selling, spinning off, or reducing capital expenditures.