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CS Professional · Corporate Restructuring, Valuation and Insolvency · Types of Corporate Restructuring

Sundaram Auto Ltd and Pragati Components Ltd, two unrelated companies, merge into a brand-new company, Sundaram Pragati Ltd, formed for this purpose. Both original companies are dissolved without winding up, and their shareholders receive shares in the new company. Which form of amalgamation is this?

This is an amalgamation by formation of a new company. Both existing companies are dissolved without winding up and their business moves into a newly incorporated company whose shares go to the old shareholders. Under absorption, one existing company would survive as the transferee, which does not happen here.

  1. AAmalgamation by absorption
  2. BAmalgamation by formation of a new companyCorrect
  3. CDemerger into a resulting company
  4. DTakeover by tender offer

Explanation

When two or more companies combine into a newly incorporated company and all the original companies are dissolved, it is an amalgamation by formation of a new company. In absorption an existing company survives and takes over the other. Here neither survives.

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