Question

When does company resort to internal reconstruction?

Answer 1

we have discussed 'Amalgamation of Companies' where two companies are merged together or one company is purchased by another to become a single company.

This is generally called 'Internal Reconstruction' of company. The term ' Reconstruction' implies the process followed for reorganisation of a company with respect to its capital

Hope it helps u frd :-)

Answer 2

Answer:

The company resorts to internal reconstruction when there is a shortage of capital, huge losses, and the assets are overvalued.

Explanation:

• Internal reconstruction is the restructuring of a corporation`s capital shape without setting up a brand new corporation or liquidating a present corporation.
• Internal reconstruction is executed to extrude the fairness capital or to lessen the fairness capital without liquidation.

• The internal reconstruction requires a lot of time and legal requirements, as the company needs to obtain the consent of all parties.

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