Explain the terms ‘reconstruction’ an ‘amalgamation’.

Who is a dissenting shareholder in case of amalgamation of companies?

Explain the provisions of the Companies Act with regard to the acquisition

of shares of dissenting shareholders. fC.A. (Final) May, 1986]

f1Lns .

(a) Meaning of Reconstruction

The term ‘reconstruction’, inter alia, indicates the process which involves (i) the transfer of undertaking of an existing company to another company, usually incorporated for the purpose. The old company ceases to exist. However, all the assets might not pass to the new company; (ii) the carrying on of substantially the same business by the same persons; (iii) the rights of the shareholders in the old company are satisfied by their being allotted shares in the new company.

A reconstruction is made for any of the following purposes:

(i) To Extend the Operations of the Company. If the shares are fully paid up and it is desired to raise further capital, the shareholders in the old company may be issued only partly paid shares in the new company so that by calling up the uncalled amount, the company would have the necessary funds for carrying on its business.

Also, if the company wants to do business which is totally unrelated to its objects, it may resort to reconstruction. The objects clause of the new company may include the business which it wants to pursue.

(ii) For Purposes of Reorganisation. It implies alteration or modification of the rights of shareholders or creditors or both.

There is also the concept of internal reconstruction, wherein the company continues to exist and operate with adjustments of rights of shareholders and/ or creditors, lender, etc. In such a reconstruction always some sacrifice is pn’!sent for members and creditors to enable the company to operate as a going concern.

Meaning of Amalgamation

Amalgamation is the blending of two or more undertakings into one undertaking, the shareholders of each blending company becoming substantially the shareholders of the other company which holds blended undertakings.

What is Debt

· ‘Debt’ means a determined or definite sum of money payable immediately.

It must be an undisputed debt. In case of a dispute, the dispute must be a gem,ine dispute.

· A contingent or conditional liability is not a debt unless contingency or condition

has already happened. * Application money due for refund or the interest thereon is not a debt. * The Punjab and Haryana High Court in the case of Dr. S.J. Sodhi v. c. T. Scan

Research Centre (P.) Ltd. (1995) and again in Pritam Singh Batra v. Deol Agro Oil Ltd. has held that the application money due for refund and the interest thereon is not a debt since the petitioner was not a creditor.