1. No new company is formed. The existing company continues as a going concern; 2. The ailing company will not gove ito liquidation under the capital reduction scheme and 3. Involves complying the requirements under the Companies Act.
External Reconstruction:-
1. A new company is formed by the existing shareholder of the old company to take over the assets and liabilities; 2. The ailing company goes into liquidation and 3. There is no need to comply with particular clause in the Companies Act.
27 March 2012
The word used by you is re-construction. Internal and External.
Internal reconstruction is when the company is in loss and the interest burden or the creditors are increasing then you can reduce the value of your shares, negotiate with the creditors for settlement of debts, revaluation of assets etc.
External means going to BIFR which will reduce the Bank liability and liabilities of creditors by capitalising the debt or reduction of bank interest.
It is not a case of amalgamation that a new company will come into force
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