Difference between amalgamation and external reconstruction?

Answer 1

Difference between Amalgamation and Reconstruction

Difference between Amalgamation and Reconstruction

The difference between amalgamation and reconstruction is that amalgamation involves the blending of two or more different concerns, and not merely the continuance of one concern; reconstruction implies the carrying on of an existing business in some altered form, so that persons interested in the business may remain substantially the same.

(b) Dissenting Shareholder

In relation to a take-over bid, 'dissenting shareholder' means a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract [Sec. 395(5)].

Thus, a shareholder can be called a 'dissenting shareholder' when he has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract.

ReconstructionlAmalgamationby Sale of Shares [Section 395]

Sale of shares is the simplest process of amalgamation or take-over. It involves take-over without following the Court procedure under Sections 391 and 394. Shares are sold and registered in the name of the purchasing company or on its behalf. The selling shareholders receive either compensation or shares in the acquiring company. In case certain shareholders dissent, section 395 contains provisions for the compulsory acquisition by the transferee company of shares of the dissenting minority. The shares may be acquired on the same terms on which the shares of the approving shareholders are to be transferred to it. This will prevent the minority shareholders from demanding too high a price for their shares.

Secti0!l 395 lays down as follows:

1. Where the transferee company has offered to acquire the shares or any class of shares of the transferor company, the scheme or contract embodying such offer has to be approved by the shareholders concerned within four months. The approval must be given by the holders of not less than 9 /lOths in value of the shares whose transfer is involved. In computing 9/10ths value of shares, the shares already held by the transferee company or its nominee or subsidiary are excluded.

2. If the offer is approved, the transferee company may, at any time within two months of the expiry of the said four months, give a notice to the dissenting shareholders that it desires to acquire their shares. The transferee company is entitled and bound to acquire the shares of dissenting shareholders on the same terms on which the shares of approving shareholders were approved unless on the application of the dissenti~$ shareholders within one month of such notice, the Court orders otherwise.

3. If the transferee company already holds in the transferor company shares of

the class whose transfer is involved, to a value more than l/lOth of the total

. (1983J 140 ITR (St.) 2.

.. The transferee company need not wait for the expiry period of four months for serving notice on the

dissentient shareholders to acquire the shares-Western Manufacturing (Reading) Ltd., In re [1955J 3 AI

Answer 2

Amalgamation involves two or more companies merging to form a new entity, combining their assets, liabilities, and operations. External reconstruction is the process of reorganizing a company's capital structure and operations without involving the formation of a new entity, often to improve financial performance or simplify business operations.