Internal Reconstruction Key Points Analysis

Internal reconstruction refers to the process where a company reorganizes its capital structure and liabilities without being liquidated or forming a new company. This process aims to improve the company's financial health. Let's examine each statement provided:

Analyzing Statements on Internal Reconstruction

• Statement A: The existing company is liquidated

  This statement is false. A defining characteristic of internal reconstruction is that the original company continues to exist; it is not liquidated. Liquidation is associated with external reconstruction.

• Statement B: No new company is formed

  This statement is true. Internal reconstruction involves modifying the existing company's structure, not creating a new legal entity.

• Statement C: There is certain reduction of capital and sometime liabilities are also reduced

  This statement is true. A common feature of internal reconstruction is the reduction of share capital (e.g., writing off intangible assets or accumulated losses) and potentially restructuring or reducing liabilities.

• Statement D: The new company issues fresh capital

  This statement is false. The issuance of fresh capital is typically part of external reconstruction where a new company takes over the business. Internal reconstruction focuses on restructuring existing capital and liabilities.

• Statement E: It is done as per section 66 of the Companies Act, 2013

  This statement is true. Section 66 of the Companies Act, 2013 specifically deals with the 'Reduction of Share Capital', which is a fundamental aspect often undertaken during internal reconstruction.

Conclusion on Internal Reconstruction

Based on the analysis, the statements that accurately describe internal reconstruction are B, C, and E.