Amalgamation Absorption Reconstruction By Mr A Gurunathan M
Amalgamation , Absorption & Reconstruction By: Mr. A. Gurunathan, M. Com. , M. Phil. , NET. , (Ph. D) 1
Amalgamation, Absorption – Meaning Amalgamation: • Two or more companies join together & form a new company. • Existing company is liquidated. Absorption: • One existing company takes over the business of one or more existing companies. • No new company is formed. • Vendor companies are liquidated. 2
Reconstruction – Meaning & Types of Reconstruction: • Internal reconstruction • External reconstruction Internal reconstruction • Without liquidating the company making changes in the capital structure, No new company will formed External reconstruction • Existing company is liquidated & a new company is formed with same shareholders. • 3 Sick companies with accumulated losses usually undergo reconstruction.
Amalgamation – Types of Amalgamation: • Nature of merger • Nature of purchase 4
Amalgamation – Nature of Merger: • All the assets & liabilities are taken over by transferee company. • Not less than 90% of the shareholders will become the equity shareholders of transferee company. • Consideration will be in the form equity shares of the transferee company. • The business of the transferor company is intended to be carried by the transferee company. • No adjustment are made in the books of accounts except to ensure uniformity of accounting policies. 5
Amalgamation – Nature of Purchase: • All the assets & liabilities of selling company may not be taken over. • Less than 90% of the selling company shareholders will become the shareholders of the purchasing company. • Consideration may be in the form of shares, cash or in any other agreed form. • Selling company’s business may or may not be carried on in future. • Assets & Liabilities may be shown at values other than book values at the discretion of the purchasing company. 6
Amalgamation – Purchase Consideration Meaning: • Aggregate of the shares & other securities and payment made in the form of cash or other assets. Computation Methods: • Lump sum payment method • Net Assets method • Intrinsic value method 7
Forms of Consideration • Cash • Shares • Debentures etc. . , 8
Thank You 9
- Slides: 9