Question

Internal Reconstruction involves reduction of capital.

Answer 1

Reduction of Capital. For any company, a capital reorganization issue is a process by which restructuring takes place and surplus cash is returned to shareholders. The other diagonally opposite reasons forreduction of capital is that there is no cash, in fact, capital is lost.

Answer 2

Reduction of capital can take place without the sanction of the tribunal/court in case of buy back of shares. In case of forfeiture of shares, a company may if authorized by its articles forfeit shares for non-payment of calls by the shareholders.

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