The main objective of amalgamation is to achieve synergetic benefits which arise, when two companies can achieve more in combination than when they are individual entities. Amalgamation is defined as a simple arrangement or reconstruction of business. This document is highly rated by B Com students and … Section-C 8. Sec 394 - Provisions for facilitating reconstruction and amalgamation of companies. 12.50 each. Notwith-standing anything contained in any law for the time being in force, no banking company shall be amalgamated with another banking company, unless a scheme containing the terms of such amalgamation has been placed in draft before the shareholders of each of the banking companies concerned separately, and … In amalgamation, two or more companies are fused into one by merger or by one taking over the other. l To acquaint students with the accounting procedure and in-depth knowledge of preparation of various accounts l To develop an understanding of the company … Purchase Consideration (PC) 5 1D. Amalgamation of companies involves liquidation of two or more companies, while external reconstruction involves liquidation of only one company, 2. 15.1. (b) Two equity shares of Rs. Amalgamation • Term amalgamation is used when two or more existing companies into liquidation and new co. is formed to takeover their business. Financial Accounting (B.Com.,BAF,BBI,BMS & other) MULTIPLE CHOICE QUESTIONS (MCQ) SESSION NO 01 1. d) Take over. Section 15 of the Stamp Act provides relief from stamp duty in connection with a plan for the reconstruction or amalgamation of companies if the following conditions (among others) are met. Accounting for amalgamations 8 1E. Explain the term Amalgamation Absorption & Reconstruction Amalgamation: When a new company (Amalgamated company/purchasing company) is formed to take-over the business of two or more existing companies (amalgamating company/vendor company), it is called amalgamation. Valuation of Goodwill and Shares. Amalgamation involving inter-company shareholding (AS-14 is silent on this point) 20. The scheme of reconstruction was agreed as follows : (a) A new company to be formed “Sonam Ltd.” with an authorized capital of Rs. The new company takes over all existing assets and liabilities of the companies amalgamated. Existing companies A and B are wound up and a new company C is formed to take over the businesses of A and B Amalgamation: Existing company A takes over the business of another existing company B which is wound up. (c) external reconstruction (d) amalgamation 11. It is none the less a reconstruction because all the assets do not pass to the new company, or all the shareholders of the transferor company are not shareholders in the transferee company, or the liabilities of the transferor company are not taken over by the transferee company. The upcoming discussion will update you about the difference between External Reconstruction and Amalgamation. b. Liquidation of Companies. Provisions for facilitating reconstruction and amalgamation of companies. In Amalgamation, two or more companies combine to create a new company. Absorption 3.1 Internal Reconstruction 3.2 External Reconstruction Definition. ... •Amalgamation of 2 or more companies in Singapore is subject to the order of ... companies shall be converted into the shares and rights provided for in the amalgamation proposal. Types of merger 4 1C. reconstruction or amalgamation of companies 3.—(1) Subject to paragraph (3), the conditions for relief from ad valorem stamp duty in respect of a scheme for the reconstruction of Stamp Duties (Relief from Stamp Duty upon Reconstruction or Amalgamation of Companies) p. 2 2002 Ed. For e.g. This Standard is directed principally to companies although some of its requirements also apply to financial statements of other enterprises. COMPROMISE, ARRANGEMENT, RECONSTRUCTION, AMALGAMATION AND MERGER OF COMPANIES Subject Name: Law Paper Name: Corporate Law Module Id: 16 Pre-Requisites: Knowledge of Companies Act 2013 and Companies Act 1956 Learning Objectives After reading this module, you shall be able to learn about the following: In external reconstruction, one existing company goes into liquidation and a new company isformed to take overthe former company. Description If a new co XY Ltd. Is formed to take over the business of two existing companies, X Ltd. and Y Ltd. ,it is a case of amalgamation (ii) External reconstruction (iii) Amalgamation. It is none the less a reconstruction because all the assets do not pass to the new company, or all the shareholders of the transferor company are not shareholders in the transferee company, or the liabilities of the transferor company are not taken over by the transferee company. Relief from stamp duty in connection with a scheme for the reconstruction or amalgamation of companies, subject to conditions. Main Difference. 1. Sec 394 - Provisions for facilitating reconstruction and amalgamation of companies. MERGER AND AMALGAMATION OF COMPANIES [Effective from 15th December, 2016](1) Where an application is made to the Tribunal under section 230 for the sanctioning of a compromise or an arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown … (iii) Amalgamation. 10 each. It is a process that involves combining of two or more companies as either absorption or as blend. Amalgamation is a type of integration processes used under an … The main difference between Amalgamation and Absorption is that Amalgamation is the legal process, in which two or more companies combine themselves to form a new company and Absorption is when two or more companies combined into an existing company.. Amalgamation vs. Absorption. Final accounts of companies including managerial remuneration, disposal of profits and issue of bonus shares. (1) Where an application is made to the Court under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Court When amalgamation is affected, some or all the assets and liabilities of the vendor companies, are transferred to the vendee company. When two companies are merged and are so joined as to form third company or one is absorbed into other or blended with another, the amalgamating company loses its identity. Meanings 2 1B. Difference between External Reconstruction and Amalgamation 1 In external reconstruction only one company is involved while in amalgamation two or more companies are involved. External Reconstruction IV. It is a case of— (i) Absorption (ii) External reconstruction (iii) Amalgamation. Key features of amalgamation are that: it avoids the necessity and expense of transferring assets to a single entity; and pre-existing contracts remain in place and do not need to be assigned. The merger means an arrangement whereby one or more existing companies merge their … Basis Amalgamation Absorption External Reconstruction Meaning . May 23, 2021 - Introduction to Amalgamation - Amalgamation of Companies, Advanced Corporate Accounting B Com Notes | EduRev is made by best teachers of B Com. Arrangements, Reconstruction & Amalgamation under Singapore Companies Act- Part II. When the merger involves liquidation of one existing sick company and formation of one new company, it is called (a) internal reconstruction (b) absorption (c) external reconstruction (d) amalgamation 12.A feature which is common in all cases of merger viz. (1) Filing of an application for purpose of reconstruction or companies involving merger/amalgamation or transfer of undertaking, property, etc. Amalgamation or merger is also a method of reconstruction. The other objectives of amalgamation are: (i) To reap economies of scale (ii) To eliminate competition as Amalgamation/ Absorption/ External reconstruction. 1. (A)Amalgamation (B)Absorption (C)Reconstruction (D) None of the Above 25. Provisions relating to merger, amalgamation and winding-up etc. The amalgamation can be done by the scheme of undertaking- here the new entity undertakes the whole asset of the... 2. b) External reconstruction. Companies Act, 1956. But section 394 of the Companies Act 1956, states that amalgamation refers to the merger of one company with another company to facilitate reconstruction and merger. Companies Act, 1956. Both reconstruction as well as Amalgamationrequire similar legal procedures and schemes canbe carried out :(a) Section 494 and 507 provide for Reconstruction or Amalgamation of companies by winding up the company voluntary . Internal reconstruction (without scheme) 9. On the other hand, an external reconstruction is a form of corporate restructuring wherein the existing company is liquidated to give birth to a new company, for continuing … Definition of Amalgamation Amalgamation is a process in which two companies liquidate to create a new company, which takes over the business of the liquidating companies. 7. (1) Where an application is made to the Court under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown … Amalgamation of companies results in combination of companies, but external reconstruction does not result in any such combination. Prior to 1st April 1995, the accounting procedures for amalgamation were under three different treatment, that is, Amalgamation, Absorption and Reconstruction of companies. Such external reconstruction is essentially covered under the category ‘amalgamation in the nature of merger’ in AS-14. a new … 25/- for the purpose of amalgamation. Amalgamation 2. Two or more companies are disbanded, and a new firm is established to hand over the business. 2. external reconstruction. Amalgamation of companies involves liquidation of two or more companies, while external reconstruction involves liquidation of only one company, 2. Two or more companies combining to form a new company is called absorption. Accounting for Amalgamations Introduction This standard deals with accounting for amalgamations and the treatment of any resultant goodwill or reserves. The current firm hands over the undertaking of one or more current companies. In computing purchase consideration by ‘net asset method’ all assets including fictitious assets should be considered. 6. The permitted entities (LLP or companies) are associated where: Companies whose schemes are pending approval before the National Company Law Tribunal (NCLT) and companies proposing to undertake amalgamation or reconstruction having registered office in Tamil Nadu or having immovable property in Tamil Nadu, may consider the impact of above amendment. absorption, amalgamation and external The Stamp Duties (Relief from Stamp Duty upon Reconstruction or Amalgamation of Companies) (Amendment) Rules 2014 has been made effective on 22 May 2014. Amalgamation refers to when two companies which are in the same line of duty come together to form one company. Merger and Amalgamation is a restructuring tool available to Indian conglomerates aiming to expand and diversify their businesses for various reasons whether it is to gain competitive advantage, reduce costs, or availing of tax benefits. (ii) External reconstruction External Reconstruction is a process in which the company’s financial affairs are wound up, and a new company is formed to take over the assets and liabilities of the existing company, after the reorganization of the financial position. Provisions for facilitating reconstruction and amalgamation of companies Where an application is made to the Court as above for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Court- Where a bona fide reconstruction takes place to which the provisions of Section 178. It serves as an apt method of corporate restructuring to bring about a change for the better and make business environment competitive. It is the conversion of two companies and two balance sheets into one company and one (combined) balance sheet. Amalgamation It is a combination of two or more businesses into a single business enterprise. It requires the approval of shareholders, creditors and National Company Law Tribunal (NCLT). l To acquaint students with the accounting procedure and in-depth knowledge of preparation of various accounts l To develop an understanding of the company regulations among the students Sr. No. Amalgamation is the combination of two or more companies into a new entity by combining the assets and liabilities of both entities into one. The new company allots its shares to the shareholders of the amalgamating companies. AMALGAMATION, ABSORPTION & RECONSTRUCTION Submitted by Guided by Vijay Somase Prof Mahale .S. This standard … Amalgamation of companies results in combination of companies, but external reconstruction does not result in any such combination. 10. ‘Amalgamation’ is a blending of two or more existing undertakings into one undertaking, the shareholders of each blending company becoming substantially the shareholders in the company … to another company consisting substantially of the same shareholders with a view to its being continued by the transferee company, there is external reconstruction. Meaning of Amalgamation: Two or more than two joint stock companies may combine their undertakings and become one joint stock company to reap the economies of scale and to reduce or eliminate competition. Future retail Ltd is liquidated and a new company Future Enterprises is formed to take over its business. These sections amongst others, … (1) Where an application is made to the Court under this Part for the approval of a compromise or arrangement and it is shown to the Court that the compromise or arrangement has been proposed for the purposes of or in … Powers And Functions Of Court During Reconstruction Of Company b) All the assets and liabilities of the two companies, except Investments are taken over. Amalgamation refers to corporate reconstruction in which two or more companies come together and fuse to form a new company. 6. 5 paid up in the new company (c) Four equity shares of Rs. The transferor companies lose their identity to form a new company (transferee company). External reconstruction can also take place through amalgamation. The above companies have agreed to amalgamate into XY Ltd. a) X Ltd. holds 8,000 shares in Y Ltd. at Rs. The Institute of Chartered Accountants of India introduced a new Accounting Standard known as “Accounting Standard – 14” (AS-14) from 1.4.1995 which over-ruled the old system of accounting. External reconstruction ‘Amalgamation’ is a blending of two or more existing undertakings into one undertaking, the shareholders of each blending company becoming substantially the shareholders in the company … Amalgamation, absorption. The Companies Ordinance, among other things, provides for compromise, arrangements, amalgamations and reconstruction. 3. in each case other than under or in connection with a scheme of amalgamation or reconstruction not involving a bankruptcy or insolvency. Prior to 1st April 1995, the accounting procedures for amalgamation were under three different treatment, that is, Amalgamation, Absorption and Reconstruction of companies. Ans. This chapter is a complete code in itself which contains provisions regarding all forms of compromises with creditors and arrangements with members. 3. Similarly, the shareholders of the old entity turn out as the … 6,00,000 all in equity shares of Rs. Reconstruction Under this, there is 2. Two or more companies can either be absorbed by an entirely new firm or a subsidiary powered by one of the basic firm. Amalgamation of Companies (excluding inter-company holdings). termination by reconstruction or amalgamation; change in control: 6: 16. termination of employment by the company for cause : 7: 17. termination of employment by the company without cause : 7: 18. termination of employment by the executive : 7: 19. obligations upon termination of employment; certain other … It is for the mutual advantage of the acquirer and acquired companies. Internal reconstruction can be defined as the reorganization of the company, without liquidating the existing company and forming a new one. Merger refers to two companies joining together to form one company. Amalgamation – means combination of two or more independent business corporations into a single enterprise Demerger– means transfer and vesting of an undertaking of a company into another company Reconstruction- means re-organization of share capital in any manner; varying the rights of shareholders and/or creditors If the Company undergoes any process of reconstruction or amalgamation (whether or not involving the liquidation of the Company) and the Executive is offered employment by the successor or proposed successor to the Company or any Group Companies on terms which as a whole are no less favourable than those under … From the point of view of an accountant, external reconstruction is similar to amalgamation in the nature of purchase; the books of the transferor company are closed and in the books of the transferee company, the purchase of the business is recorded. Definitions as per Accounting Standard 14 (AS‐14) a. Amalgamation –means an amalgamation pursuantto the provisions ofthe Companies Act 1956 or any otherstatute whichmay be applicable to companies. External reconstruction can also take place through mergers. The Institute of Chartered Accountants of India introduced a new Accounting Standard known as “Accounting Standard – 14” (AS-14) from 1.4.1995 … c) Amalgamation. AMALGAMATION Ab.Ltd A.Ltd B.Ltd One or more companies are liquidated One new company is formed The nature of business of both companies is similar. Reconstruction and Amalgamation The company wished to avoid being wound up and negotiated a scheme in which the existing shareholdings in the company would be transferred to a new company which would take over the company’s undertaking and assets as well as its debts. On the other hand, an external reconstruction is a form of corporate restructuring wherein the existing company is liquidated to give birth to a new company, for continuing the business of the existing one. (b) Section 394 and 395 provide for a scheme of Reconstruction and Amalgamation without winding up . the compromise or arrangement for the reconstruction of the company or companies involving merger or the amalgamation of any two or more companies or for transfer of undertaking. 2. syllaBus accounting for companies – ii Objectives: l To develop an understanding about accounting treatment in case of amalgamation and reconstruction. amalgamation or reconstruction of companies under Section 394 of the Companies Act, 1956 or under the order of the Reserve Bank of India under section 44A of the Banking Regulation Act, 10% of the aggregate of the market value of the shares issued or allotted in exchange or otherwise and the amount paid for such amalgamation.
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