Company Reconstruction-Type (Part 1)
| Company Reconstruction:- |
| · A term used to describe the drastic formal changes in a company’s capital structure as a result of certain circumstances. |
| Type of Reconstruction:- |
| · Divided into two(2) types namely:
· Internal reconstruction · External reconstruction |
| Internal Reconstruction:- |
| · Undertaken by companies that have surplus capital or companies whose capital has been eroded by trading losses |
| · In this type of internal reconstruction, companies who wish to reduce their capital need to comply with certain requirements of their local Companies Act. This normally involves the following:
· The capital reduction scheme must be confirmed by the court · The articles of association of the company must provide for such reduction of capital and · A special resolution must be passed by the company. |
|
Three(3) situations where the Companies Act ( in this case
Malaysia) permits such capital reduction:- · To reduce or write off uncalled capital on any of its shares; · To cancel paid up capital not represented by assets; or · To refund any surplus capital ie. Capital in excess of the needs of the company ( a company which has par value of $1 applies to reduce to 50 cent per share so as to refund 50 cent per share to the shareholders ) |
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- How Do We Classify The Share Capital In A Company?
- Internal Company Reconstruction-Capital Reduction Where Capital Is Not Represented by Available Assets
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