AMALGAMATION, ABSORPTION & EXTERNAL RECONSTRUCTION

When two or more existing companies combine together to form a new company, it is termed as

• Amalgamation

• Absorption

• External reconstruction

• Internal reconstruction

There are 2 types of amalgamation

• True

• False

The following are the features of amalgamation in the nature of merger, EXCEPT:

• More than 90% of shareholder of the selling company become the shareholder of purchasing company.

• Purchase consideration is in the form of shares only

• Assets and liabilities taken over by the purchasing company are shown at book values

• Selling companies business will not be continued by the purchasing company.

The following are the features of amalgamation in the nature of purchase, EXCEPT:

• Less than 90% of the shareholders of selling company become the shareholder of purchasing company.

• Selling companies business may or may not be continued by the purchasing company.

• Assets & Liabilities taken over by the purchasing company will be shown at the book values only

• Purchase consideration may be in the form of cash, shares or debentures

Purchase consideration is the price payable by the purchasing company to the selling companies shareholders.

• True

• False

There are ______ methods for calculating purchase consideration.

• 2

• 4

• 6

• 8

Under __________ method, the purchase consideration need not be calculated as it will be stated in the agreement itself.

• Lumpsum Method

• Net Payment Method

• Net Asset Method

• Intrinsic Value Method

Under Net payment method, purchase consideration is calculated based on

• Adding Cash, Value of Shares and Value of Debentures Issued to shareholders

• Exchange ratio of shares

• Need not be calculated

• Net Assets Value

When an existing company takes over two or more existing company, it is termed as

• Amalgamation

• Absorption

• External Reconstruction

• Internal Reconstruction

In case of absorption, no new company is formed.

• True

• False