Distinction between amalgamation and internal reconstruction
Answers
Amalgamation is when two or more companies merge. It is the conversion of two companies and two balance sheets into one company and one (combined) balance sheet. In amalgamation, the identity of both the companies exist and survive. It is the pooling of assets and liabilities and interest of two companies. It usually consists of two companies of same size and stature.
Example: Maruti motors(India) and Suzuki(Japan) were amalgamated to form Maruti Suzuki.
Internal reconstruction is carried when when the company faces consistent financial pressure and is incurring loss since long. Here, there might be some alterations in share capital and waiver of some debts. The company is neither liquidated nor any new company is formed. “ And reduced” words are to be added in balance sheet . This procedure includes involvement of court and is bit tedious and lengthy.