Reconstructions,Amalgamations and Consolidations of Company Accounts

Abstract

The situation may arise where a limited company wishes to reconstruct its capital in order to bring this into line with its assets position. The reasons for a reconstruction could include:

• (1) The company has suffered substantial losses of funds either through poor trading conditions, failure of investments, losses of fixed assets such as a substantial fall in value below the cost of property, or the seizure of company assets by a foreign government.

• (2) The capital gearing has become unsuitable for the profit-earning capacity of the company, such as a company having a high proportion of fixed interest capital or loan stock, the interest on which is greater than its ability to earn profits.

• (3) To simplify the capital structure by reducing the number of classes of shareholder.