2. SUPPOSE—
EXISTING COMPANY Y
EXISTING COMPANY Z MERGED XZ COMPANY
(TRANFEROR/VENDOR) (TRANSFEREE COMPANY)
(II) ABSORPTION (2 EXISTING COMPANY OR ONE)
COMAPANY A
COMPANY B
(EXISTING COMPANIES) C LTD (TAKE OVER A&B)
EXTERNAL RECONSTRUCTION
EXITING COMPANY (DEH) NEW COMPANY (DIWAKAR
NET)
(DISLOVED)
3. AMALGAMATION OF COMPANY
(ARTICAL (14)
• THERE ARE TWO TYPES OF AMALGAMATION
THE NATURE OF MERGER
THE NATURE OF PURCHASE (LUM SUM )
THERE ARE FIVE CONDITION TO STAIFIED TO
BE NATURE MARGER
(1) ALL THE ASSETS AND LIABILITIES OF THE
TRANSFEOR COMPANY AFTER
AMALGAMATION THE ASSETS AND LIABILTIES
OF PURCHER COMPANY
4. CONDITIONS
• SHARE HOLDER HOLDING NOT LESS THAN 90 %
OF THE FACE VALUE OF THE QUITY SHARE OF
THE TRANSFOR COMAPANY BECOME THE EQUITY
SHAREHOLDER OF THE TRANSFREE COMPANY
• THE CONSIDERATION FOR THE AMAGALIMATION
RECEIVED BY THOSE SHARE HOLDER AGREE TO
BE A NEW COMPANY SHAREHOLDER WHOLLY BY
THE ISSUE OF EQUITY SHARES IN THE
TRANSFREE COMPANY EXCEPT THAT MAY BE
PAID IN RESPECT OF ANY FRACTIONAL SHARE
5. CONDITIONS
• THE BUSINESS OF THE COMPANY INTENTED TO BE
CARREID ON BY THE TRANFREE AFTER
AMALGAMATION
• NO ADJUSTMENT IS INTENTED TO BE MADE TO
THE BOOK OF ASSETS AND THE TRANSFREE
COMPANY
ASSETS & LIABILTIES VENOR PURCHASE
EQUITY SHARE CAPITAL VENDOR
TRANSFREE
6. PURCAHASE COSIDERATION IN QUITY
SHARE
• IT IS PRICE PAYABLE BY THE PURCASING
COMAPANY TO THE TRANSFEOR COMPANY
CACULULATION OF PURCHASE
CONSIDERATION
(1 ) LUMP –SUM PAYMENT METHOD
(2) NET ASSETS METHOD
(3) NET OR TOTAL PAYMENT METHOD
7. PURCHASE CONSIDERATION
• A TO Z LIMITED = FURNTIURE 10000
ALMIGRAH 5000
CHAIR 2000
BUILDING 200000
LAND 500000
TOTAL = 717000
LIABILITIES - 17000
NET PAY 7 LAKH
8. ILLUSTRATION
USE BOTH METHOD FOR PURCHASE AND
MERGER
AMALGAMATION
PURCHASE
CONSIDERATION
NET ASSET
NET PAYMENT
NATURE OF
MERGER
9. INTERNAL RECONSTRUCTION
• ARRANGEMENT MADE BY FIANCILLY
UNSOUND COMPANIES
XYZ LTD ---BAERING HUGE LOSS
CAPITAL <UNPAID
LIABILITIES > ASSETS
IN THAT CASE CAN DO NEOOCIATE WITH
CREDITOR
EXAMPLE----AIRTEL (2010)
10. FOR THE PURPOSE OF ACCOUNTING
• RECONSTRUCTION A/C
• CAPITAL RECONSTRUCTION ACCOUNT
GAIN—WILL BE CREDIT
LOSS -- WILL BE DEBIT
NOTE- FOR INCREASING THE VALUE OF
LIABILITIES
RECONSTRUCTION Dr
TO LIABLITIES Cr
12. FOR DECREASE THE VALUE OF
LIABITIES
• LIABILITES Dr
TO RECONSTRACTION Cr
Ex. BILLS PAYABLE OF 30000 ARE NO LONGER
OFF TO PAY
BILLS PAYABLE Dr 30000
TO RECONSTRATION Cr 30000
13. FOR INCREASING THE VALUE OF
ASSETS
• ASSETS A/C Dr
TO RECONSTRUCTION A/C Cr