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196 Reconstructions and amalgamations (Section 178 CA)

Reconstructions and amalgamations (Section 178 CA)

Under the scheme of reconstructions and amalgamations, the whole or any part of the undertaking or the property of any company concerned in the scheme is to be transferred to another company.

Reconstruction involves substantially the same persons carrying on substantially the same business, that is, one company only; whereas an amalgamation involves two or more, usually in the act of reducing to one.

The court, having approved the scheme, may make an order to provide for:

1. the transfer to Company B of the whole or any part of the undertaking and of the property or liabilities of Company A

2. the allotting and appropriation by Company B of any shares, debentures, policies or similar interests which under the scheme are to be allotted or appropriated by Company B to anyone

3. the continuation by or against Company B of any legal proceedings pending by or against Company A

4. the dissolution without winding up of Company A

5. provision to be made for dissenters from the compromise or arrangement

6. the incidental, consequential and supplemental matters necessary to secure the full and effective execution of the reconstruction or amalgamation.

The section also provides that an order transferring real property or liabilities made under Section 178(2) is not effective until “the appropriate entries are made with respect to the vesting of that land by the appropriate authority” as mentioned in Section 178(4).

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