Amalgamation Summary 1

3082 Words Oct 26th, 2011 13 Pages
MEANING OF AMALGAMATION:

In an amalgamation two or more companies are combined into one by merger or by one taking over the other. Therefore the term “amalgamation” contemplates two kinds of activities;
i) Two or more companies join to form a new company or, ii) Absorption and blending of one by the other.

Thus amalgamation includes absorption.
The purpose of companies joining together is to secure various advantages such as economies of large scale production, avoiding competition, increasing efficiency, expansion, etc.

The companies going into liquidation or merged companies are called vendor companies or transferor companies. The new company which is formed to takeover all the liquidated companies or the company with which
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The use of the pooling of interests method is confined to the following circumstances.

(i) All the assets and liabilities of the transferor company become, after amalgamation, the assets and liabilities of the transferee company.

(ii) Shareholders holding not less than 90% of the face value of the equity shares of the transferor company (other than the equity shares already held therein, immediately before the amalgamation, by the transferee company or its subsidiaries or their nominees) become equity shareholders of the transferee company by virtue of the amalgamation. (iii) The consideration for the amalgamation receivable by those equity shareholders of the transferor company who agree to become equity shareholders of the transferee company is discharged by the transferee company wholly by the issue of equity shares in the transferee company, except that cash may be paid in respect of any fractional shares. (iv) The business of the transferor company is intended to be carried on, after the amalgamation, by the transferee company. (v) No adjustment is intended to be made to the book values of the assets and liabilities of the transferor company when they are incorporated in the financial statements of the
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