Monday, January 17, 2011

Amalgamation, Absorption and Reconstruction of Company

When a new company is set up to acquire the business of existing companies, it is amalgamation. In order to take the economies of scale, to avoid competition and maintenance of prices, two of more than two joint stock companies may combine their undertakings and become one joint stock company. So amalgamation is a blending of two or more existing undertakings into one undertakings, the shareholders of each blending company becoming substantially the shareholders in the company when is to carry on the blended undertakings.
     All the assets and liabilities of the transfer company become, after amalgamation, the assets and liabilities of the transferee company. Shareholders holding not less than 90% of the face value of the equity shares of the transfer company become equity shareholders of the transferee company by virtue of amalgamation. The business of the transfer company is intended to be carried on, after the amalgamation by the transferee company. No adjustment is intended to be made to the book values of the assets and liabilities of the transfer company when they are incorporated in the financial statements.

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