What is the basic concept of amalgamation and reconstruction of a company?

When a company undergo amalgamation or reconstruction, the shares or the whole business which is collectively known as the assets of the company, may be transferred by the owner of the company to the recipient. Specifically the term reconstruction...

By: Admin | Update: 2016-11-24 10:48:41

What is the basic concept of amalgamation and reconstruction of a company?

When a company undergo amalgamation or reconstruction, the shares or the whole business which is collectively known as the assets of the company, may be transferred by the owner of the company to the recipient. Specifically the term reconstruction refers to the formation of a company which takes over the whole asset of an existing company and the nature of the total business significantly sustains same.

Further the Term amalgamation can be defined as the combination on two or often more than two companies form a third entity or one company is absolutely observed into other company.  There are few interesting details that one can consider in this reconstruction and the amalgamation process.  Both the amalgamation as well as the reconstruction procedure requires similar kind of legal schemes and procedures.

The process of amalgamation takes place when either two or else more than two companies eventually combine together into one. In this process the shareholders of amalgamating companies significantly becomes the shareholders of amalgamated company.

Reconstruction and amalgamation are the two sides of a same coin

Amalgamation is the process where two different business entities join together for the purpose of making a totally new business entity to sustain in the market by absorbing the other company.  This process can also be referred as reconstruction as there is a new formation of completely new entity.

When the two companies are merged or joined together or one company is blending with the other company to form a completely new entity then the amalgamation companies eventually lose their own identity and they emerge as totally new entity.

The procedure of Reconstruction generates when a particular company transfers the undertaking as well as the property to an absolutely new company and its shareholders.  The objective of reconstruction is to re-organize the total amount of the capital.

The amalgamation or the reconstruction process may take the following interesting forms:

1. The amalgamation can be done by the scheme of undertaking- here the new entity undertakes the whole asset of the amalgamated company.

2. The process can be done by the scheme of arrangement- there are few settlements and arrangement, are needed to transfer the capital of the company.

3. The procedure can be done by the sale of the shares- The whole process can be done easily by selling of the shares to the companies for which a lead company is generating.

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