Taking this to it's extreme, can't you just buy some property so that you owe 1 million dollars, put that debt into it's own company and then say "sorry, that company is bankrupt, I can't pay".
Is that not what's happening here? I feel like I must be missing something.
So I think the way that these rules play out WRT J&J would be that they have to include all assets pertaining to their baby powder / talc business into the new entity, along with the amount of cash that is ordinarily used to operate the business into the spin out. That way the spin out contains what realistically constituted the talc business (net of profits that have been taken or reallocate in the past), so it can be held liable for any debts associated with the same business.
EDIT: looks like in their case they're basically splitting into two companies - one that does pharmaceuticals (drugs, vaccines, etc) and the spinoff that does consumer products (Listerine, shampoo, the baby powder / talc in question, etc) with each part receiving relevant operating assets and associated liabilities, but the pharma side (which will retain the name) keeping the excess cash on hand and other non-operating assets.
https://www.bloomberg.com/news/newsletters/2021-07-20/money-...
"It does seem … wrong? Like, obviously, if you run a big company that has big liabilities, you’d like to be able to just get rid of the liabilities. And obviously companies have tried, and there are simple approaches (spin off the assets and leave the liabilities, etc.), and those simple approaches don’t work because generally it is bad for a company to be able to just get rid of its liabilities. It would be weird if there was a cheat where doing it as a Texas two-step merger did work."