Internal reconstruction is an arrangement made by companies where by the claims of shareholders, debenture holders, creditors and other liabilities are altered or reduced, so that accumulated losses are written off, assets are valued at its fair value and balance sheet shows the true and fair view of financial position.
Forms of Internal Reconstruction
There are two forms of internal reconstruction.
b) Reduction of capital
Legal provisions relating to capital reduction
A company can take up capital reduction if:
a) The articles authorizes such reduction
b) A special resolution is passed in shareholders meeting
c) The company applied to the court for an order conforming the capital reduction
d) The order of the court confirming the registrar along with the minutes of the meeting passing the resolution for capital reduction.
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