Internal reconstruction which is carried out without liquidating the company and forming a new one, , there may be external reconstruction.
Wherever an undertaking is being carried on by a company and is in substance transferred, not to an outsider, but to another company consisting substantially of the same shareholders with a view to its being continued by the transferee company, there is external reconstruction. Such external reconstruction is essen-tially covered under the category ‘amalgamation in the nature of merger’ in AS-14.
| Basis | Internal Reconstruction | External Reconstruction | |||
| Liquidation | The Existing company is not liquidated | The existing compa ny is liquidate d. | |||
| Formation | No new company is formed but o nly | A new company is formed to take | |||
| The right of Shre Holders and Creditors are Changed | over the liquidated c ompany. | ||||
| Reduction of capital | There is certain red uction of capital and sometimes the outside liabiliies like debenture holders may have to reduce their claim. | There is no reduction of capital. In fact the re is a fresh share capita l of the company. | |||
| Legal | Internal reconstruction is done as | Extern al reconstruction is regula ted | |||
| position | per prov isions of se ction 100 of the Compan ies Act, 1956 *. | by section 394 of the Compan ies Act’ 1956 | |||
Leave a Reply