Query of external reconstruction

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Mohini Lad

valsad

26 Points Joined July 2014

In external reconstruction if PC is discharged by Rs.5 per share in cash and by giving 1 equity shares for every 5 share held and for fractional shares cash is to be paid Rs.13 per share Then whether the fractional share holder will get cash for only fractional share or arlso other Rs.5 NOTE: Mr.A held 116 shares & Mr.B held 84 shares of vendor company. Please guide me

Replies (4)

Krishna Niraula

Chartered Accountant

247 Points Joined January 2009

He won't get Rs. 5 for fraction. Similar question has been done by Parveen Sharma Sir.

PC:

of A

in cash 115*5=575

in shares 1/5*115*share value(you have not specified)

for fraction 1*13=13

CA Mayank Singh Solanki

nil

27 Points Joined February 2010

A similar question has been asked in exam. The above interpretation is right. If i remember correctly in this question PC is discharged as follows (for every 5 shares held): 1. 2 Equity share of Rs. 10. Shares valued at Rs. 15, 2. 1 Preference share of Rs 10 and 3. Rs 5 shares for each share For fractional shares the consideration is Rs. 13 per share. So, if Mr. A has 116 shares, he will get for 115 shares : 1. 46 equity shares of rs 15 each 2. 23 preference shares of rs 10 each 3. Cash for 115 shares i.e. Rs 575 And for the one share left he will get Rs 13. And if you analyze, for the 115 shares he got the same amount of Rs 13 per share. For equity 46*15 - Rs 690 For preference 23*10 - Rs 230 Cash - 115*5 - Rs 575 Total- Rs 1495 for 115 shares For 1 share 1495/115 = Rs. 13 So he is getting the same amount as for the fractional shares i.e. Rs. 13 per share. So he will not be getting extra Rs 5 cash for the fractional shares held. I think that clears your doubt.