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Amalgamation of Companies
Accountancy
i)Amalgamation in the nature of merger one or more companies are merging and forming one company. that means the earliear companies are closing down. i.e., liquidating ii)Amalgamation in the nature of purchase, purchasing company is taking over vendor company. here vendor company is closing down. i.e., liquidating. my doubt: is amalgamation is type of liquidation? a)if no then why? b) if yes then example: A ltd is taking over B ltd B ltd has 10000 equity shares of 10 each fully paid up 1000 preference shares of 100 each fully paid up here it is amalgamation in the nature of purchase. some assets and liabilities of B ltd are taken over by A ltd and remaining liabilities are set off with assets and funds available all funds are completed purchase consideration agreed by A ltd to give share holders of B ltd that 1 preference share of 100 each of A ltd for every 2 preference share holders in B ltd 1 equity share of 10 each of A ltd for every 2 equity share holders in B ltd that means preference share capital in B ltd is 1 lakh but they got 50000 worth of shares in A ltd and equity share capital in B ltd is 1 lakh but they got 50000 worth of shares in A ltd here do we need to follow liquidation rules so that first preference share holders need to paid first so here do equity share holders transfer their shares to preference share holders for complying liquidation procedure
Answers (2)
The company which purchases another company will account for amalgamation. For the company which is being sold, it would be wound up. The shareholders and creditors agree the consideration that they would receive and accordingly they are paid. It may happen that preference shares may get less than their face value of capital. The courts/nclt approve scheme of merger and accordingly equity and liabilities are set off.
Amalgamation involves merging two or more companies into one entity(or) direct takeover in other case, with preference shareholders rights and preferences governed by a scheme approved by shareholders and sanctioned by NCLT...... The scheme outlines terms and conditions, including treatment of preference shares and payment too. Once approved and sanctioned, the scheme becomes legally binding and supersedes general liquidation rules. So here , what i want to conclude in summarised manner is that "The AMALGAMATION agreement supersedes(means like replace) the general liquidation rules. I think you just got to know that there's THIS MUCH topic about AMALGAMATION AGREEMENT and approvals and all that stuff 😅😅 I felt the same when i had got to know 🤣🤣👍 I hope this explanation helps you ❤️.
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