When do internal reconstruction becomes desirable
Answers
Explanation:
Internal reconstruction of a company means a recourse undertaken to make the necessary changes in the capital and debt structure of the company . It can be also explained as the scheme undertaken to bail out the company without liquidating the company.
When the company has a huge accumulated loss and it is required to write those heavy losses for the better presentation to the financial statements position , company do go for internal reconstruction.
So it is the scheme of reorganization underwhich interested parties involved in the capital structure sacrifice their holdings. They are shareholders, debenture holders, creditors,etc.
To alter the capital it requires a special resoultion to be passed in the general meeting but it does not require the confirmation by the company law tribunal. The company undergoing reconstruction should give notice to registrar of comapny within 30 days of alterations. If the company has issued all of its authorised share capital, then for the purpose of raising the funds by issue of the fresh shares it will have to increase its authorised share capital. For increasing the Authorised capital, memorandum of association of the company is required to be changed and permission from SEBI is also required to be obtained .
Answer:
When the company has a huge accumulated loss and it is required to write those heavy losses for the better presentation to the financial statements position , company do go for internal reconstruction.