Internal reconstruction

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P waitforit S (Querist)
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18 December 2012 This is regarding the reduction of share cap[sec 100-105] in internal reconstruction.

lets take an example of a company having lost 50,000 of its paid up capital due to reduction in the value of assets...
Reduction effected in two ways:
(i)by reducing the paid up value(not nominal value) of existing shares.
(ii)by reducing both the nominal values and paid up values of shares.

ITS SAID THAT THE SHAREHOLDERS WILL NOT ORDINARILY BE WILLING FOR THE FIRST ALTERNATIVE SINCE IT PUTS ADDITIONAL BURDEN ON THEM.....

please bring out the concept behind this with an example.What is the "additional burden" being referred to here?....

thanks a ton in advance....

Preety Chawda

Preety Chawda (Expert)
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19 December 2012 Its an additional burden, since the nominal value remains same and paid up value is decreased. say for eg. Nominal value remains Rs. 100/- & paid up value is reduced to Rs. 20/- in that case shareholders are required to shell out Rs. 80/- again to make the shares fully paid. Actually the amount was already been paid by them previously, which again they are paying up due to Internal reconstruction or to contribute to reconstruction of the company.

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P waitforit S

P waitforit S (Querist)
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19 December 2012 K.
But as far as the Co. is concerned this will be the favorable option coz they get to raise more funds,rite??

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