Amalgamation absorption and reconstruction of companies pdf file

Definitions meaning of merger merger is an absorption of one or more companies by a single existing company. Amalgamation, absorption and internal and external reconstruction. Definition of company for the purpose ofsf sec 391 394 sec 390 company means any company liable to be wound up under this act. Numerical on accounting treatment of amalgamation, absorption, internal and external reconstruction. Merger, amalgamation and reconstruction concept of. However it deals with schemes of merger acquisition which are stipulated under section 391 to 394.

Amalgamation absorption and reconstruction of companies module 5. This form is used to amalgamate one or more corporations to form a new alberta corporation under the business corporations act. Reconstruction and amalgamation the company wished to avoid being wound up and negotiated a scheme in which the existing shareholdings in the company would be transferred to a new company which would take over the companys undertaking and assets as well as its debts. Is formed to take over the business of two existing companies, x ltd. Neither reconstruction nor amalgamation has a precise legal meaning. This was to be effected by a scheme for reconstruction which would result in the old company s shareholders holding four per cent of the shares in the new. Merger and amalgamation of companies effective from 15th december, 20161 where an application is made to the tribunal under section 230 for the sanctioning of a compromise or an arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the tribunal a that the compromise or. What are the different types of amalgamation procedures provided for under the companies act. Difference between internal and external reconstruction with. The former is the method in which the reconstruction is. It provides a composite code for facilitating mergers and amalgamations which obviates the need for.

Amalgamation is the joining of two or more companies to form a single new company. In a number o c absorption a tion existing comp wing does. A merger is where two or more business entities combine to create a new entity or company. Prior to 1st april 1995, the accounting procedures for amalgamation were under three different treatment, that is, amalgamation, absorption and reconstruction of companies.

Amalgamation, absorption and reconstruction accounting. The merger is a combination of two or more entities into one, it is not just the accumulation of assets and liabilities of the distinct entities. Internal reconstruction of companies including reconstruction schemes. Meaning of external reconstruction differences between. Amalgamation, absorption and reconstruction of companies determining purchase consideration. External and internal reconstructions amalgamation of companies, advanced corporate accounting b com notes edurev notes for b com is made by best teachers who have written some of the best books of b com. These are two business strategies adopted by the companies to expand itself and take a competitive position in the market. The institute of chartered accountants of india introduced a new accounting standard known as accounting standard 14 as14 from 1. Reconstruction and amalgamation legal service india. The entries in the case of amalgamation in the nature of merger is almost similar to the entries given above, the only difference is. Generally, larger company purchase the business of smaller company.

Merger, amalgamation and reconstruction concept of merger. The company wished to avoid being wound up and negotiated a scheme in which the existing shareholdings in the company would be transferred to a new company which would take over the company s undertaking and assets as well as its debts. Revival, rehabilitation and restructuring of sick companies sick companies and their revival with special reference to the law and procedure relating to sick companies 15. For absorption and external reconstruction also same method n journal entries are used. In the companies second amendment act, 2002 the power of the court has been transferred to the company law tribunal. Reconstruction and amalgamation legal news law news. Section 219 of the companies act, provides that two or more companies, including holding and subsidiary companies, may amalgamate and continue as one company. Amalgamation is defined as the combination of one or more companies into a new entity. Aug 15, 2015 amalgamation means the liquidation of one or more companies and transfer of business of liquidated entities to another entity. Part 190411 company reconstructions and amalgamations s587 author.

The popular meaning of amalgamation is the dissolution of one or more companies and transfer. Amalgamation consolidation business debits and credits. Reconstruction and amalgamation legal services india. Difference between merger and amalgamation difference. For reconstruction, the owner retains at least 90% of the assets directly or indirectly after the transfer. Both the transferor and the transferee company shall make an application in the form of petition to the tribunal under section 230232 of the companies act, 20 for the puspose of sanctioning the scheme of. Difference between internal and external reconstruction. Aug, 2015 accounting for amalgamation partii amalgamation means the liquidation of one or more companies and transfer of business of liquidated entities to another entity. What are the differences between amalgamation, absorption. Understand the term amalgamation, absorption and reconstruction of companies and the methods of accounting for the same. In the part 1 click here for part i accounting for amalgamation we learnt about nature of amalgamation and.

The accounting record of absorption is similar to that of amalgamation. Understanding inter company holdings and numerical on the intercompany holdings. External and internal reconstructions amalgamation of. Upon the relevant sections of the companies act, 20 pertaining to the schemes of arrangement, compromise or reconstruction of companies being notified by the ministry of corporate affairs mca, the scheme of amalgamation shall be deemed to have been formulated and presented. For instance, two companies x and y gets liquidated and there. The nature of business of both companies is similar. Merger and amalgamation of companies effective from 15th december, 20161 where an application is made to the tribunal under section 230 for the sanctioning of a compromise or an arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the tribunal. The following are the summarised balance sheets of v ltd and p ltd as at 31st march.

In spite of much similarity in amalgamation an absorption, the main differences of. Section 232 of companies act, 20 merger and amalgamation. Fixed assets of both the companies are to be revalued at 20% above book value. Sick industrial companies special provisions act, 1985, would be obtained and the transfer and vesting of the undertaking of amalgamating company with the amalgamated company would take effect. Both the transferor and the transferee company shall make an application in the form of petition to the tribunal under section 230232 of the companies act, 20 for the puspose of sanctioning the scheme of amalgamation. Amalgamation and external reconstruction 8 accounting. Problems on amalgamation and external reconstruction. There are two methods of reconstruction which are internal reconstruction and external reconstruction. Amalgamation means the liquidation of one or more companies and transfer of business of liquidated entities to another entity. In an amalgamation, two or more companies are fused into one by merger or by one taking over the other. The standard classifies an amalgamation process either in nature of merger, or in nature of the purchase. Oct 28, 2016 the process of external reconstruction is governed by the process of amalgamation in the nature of merger under the companies act, 20. A scheme of amalgamation normally should also contain. Amalgamation of companies by cacma santosh kumardownload.

Understanding common difference between amalgamation and absorption is necessary before moving toward its accounting part. Amalgamation is a blending of two or more existing undertakings into one undertaking, the shareholders of. Jan 04, 2018 amalgamation is when two or more companies merge. As 14 accounting for amalgamation revised summary pdf. Here is a compilation of top five accounting problems on amalgamation, absorption and reconstruction with its relevant solutions. When the two companies are merged and are so joined as to form a third company or one is dissolved into one or blended with another. Section 587, deals with special types of company reconstruction and amalgamation under schemes of arrangement under section 201 as extended by section 203 and section 202, companies act, 1963, which may not technically involve an exchange of. Absorption of companies is also included into amalgamation. The companies court rules 1959, income tax act, 1961. Amalgamation, as its name suggests, is nothing but two companies becoming one. Pass the journal entries to close vendor company pass the journal entries in the books of purchasing company and also. Learning objectives after studying this chapter, you will be able to.

An amalgamation is where one business entity acquires one or more business entities. Reconstruction is a process of the companys reorganization, concerning legal, operational, ownership and other structures, by revaluing assets and reassessing the liabilities. We use your linkedin profile and activity data to personalize ads and to show you more relevant ads. Breaking up is hard to do miljan and spicer fraser institute 2015 introduction at the conclusion of torontos most recent municipal election, pundits and researchers lined up to analyze the results. The companies act, 1956 does not define the term merger or amalgamation. What are the differences between amalgamation, absorption and. This scheme is known as single window clearance scheme. Reconstruction or amalgamation has no precise legal meaning. For company final accounts format as per revised schedule vi. Besides, companiescourt rules, 1959 lay down the procedure for carrying out amalgamations. Today we are providing the complete details of as 14 accounting for amalgamation i. Amalgamation term amalgamation is used when two or more existing companies into liquidation and new co.

Amalgamation of companies involves liquidation of two or more companies, while external reconstruction involves liquidation of only one company, 2. Meaning and features of absorption accountingmanagement. Sep 18, 2010 the two companies may join to form a new company but there may be absorption or blending of one by the other, both amount to amalgamation. Amalgamation absorption and reconstruction of companies. Difference between amalgamation and absorption with. The popular meaning of amalgamation is the dissolution of. In this case two companies get liquidated and one new company. The above two companies amalgamated on the date of the balance and a new company. Acquiring company is a single existing company that purchases the majority of equity shares of one or more companies. Objectives after studying this unit, you will be able to. The two companies may join to form a new company but there may be absorption or blending of one by the other, both amount to amalgamation.

In the previous articles, we have given as 6 depreciation and as 26 intangible assets. Amalgamation module vi amalgamation absorption and. Related topics meaning and features of amalgamation. Securitization and debt recovery overview of the securitization and reconstruction of financial. Where an undertaking is being carried on by a company and is in substance transferred, not to an outsider, but to another company consisting substantially of the same shareholders with a view to its being continued by the transferee company, there is a reconstruction. In amalgamation, the identity of both the companies exist and survive.

For the purpose of this act the terms merger and amalgamation are synonymous. Understand the concept of amalgamation of partnership firms. Chapter1 accounts of amalgamation of companies jhbwc. On the other hand, absorption is the process in which the one dominant company takes control over the weaker company. Differences between absorption and external reconstruction 1. In this article we will discuss about the top five problems on amalgamation and external reconstruction with their relevant solutions. There may be amalgamation either transfer of two or more undertakings to an existing company or new company. A merger happens when two or more companies who share similar operations or are engaged in the same line of business combine to.

Calculate purchase consideration under various methods. These bills are supported by documents such as bill of lading, insurance policy etc. Amalgamation and external reconstruction 8 accounting problems. Pass necessary journal entries in the books of amalgamating old firms and also in the. Amalgamation of banking companies and government companies.

However, one should remember that amalgamation as its name suggests, is nothing but two companies becoming one. Legal, accounting and taxation aspect of amalgamation. Know the accounting procedure for amalgamation of partnership firms. Amalgamation of companies results in combination of companies, but external reconstruction does not result in any such combination. The terms merger and amalgamation have not been defined in the companies act, 1956 though this voluminous piece of legislation contains more than 50 definitions in section 2 of the act. Jul 26, 2018 the primary difference between amalgamation and absorption of companies is that in amalgamation, the two companies are liquidated to form a new company, but in absorption only the merged company goes into liquidation, but there is no formation of a new company. Features of absorption one or more companies are liquidated. Jan 11, 2018 amalgamation is defined as the combination of one or more companies into a new entity. In the process of external reconstruction, a new company is formed to take over the liquidated company and the newly formed company gets a fresh share capital without any reduction in the share capital.