Reconstruction (law)
Encyclopedia
Reconstruction in law
refers typically to the transfer of a company's (or several companies') business to a new company. The old company will get put into liquidation, and shareholders will agree to take shares of equivalent value in the new company.
In UK company law, the governing provisions are in the Insolvency Act 1986
, ss. 110–111. The sanction of a court is not required (unlike under a so called "scheme of arrangement
", which could or creditors). Yet if a shareholder objects, she may require cash payment rather than shares. Creditors who object to have their debts transferred to a new company can demand satisfication during the old company's liquidation.
Small private companies, family companies and investment trusts often use the procedure. The purposes can vary, from changing the objects of the business, varying share class rights, or reorganising before a demerger
takes place.
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
refers typically to the transfer of a company's (or several companies') business to a new company. The old company will get put into liquidation, and shareholders will agree to take shares of equivalent value in the new company.
In UK company law, the governing provisions are in the Insolvency Act 1986
Insolvency Act 1986
The Insolvency Act 1986 is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK.-History:...
, ss. 110–111. The sanction of a court is not required (unlike under a so called "scheme of arrangement
Scheme of arrangement
A scheme of arrangement is a court-approved agreement between a company and its shareholders or creditors...
", which could or creditors). Yet if a shareholder objects, she may require cash payment rather than shares. Creditors who object to have their debts transferred to a new company can demand satisfication during the old company's liquidation.
Small private companies, family companies and investment trusts often use the procedure. The purposes can vary, from changing the objects of the business, varying share class rights, or reorganising before a demerger
Demerger
Demerger is a form of corporate restructuring in which the an entity's business operations are segregated into one or more components. It is the converse of a merger or acquisition....
takes place.