Reconstruction is a process where a company's affairs are reorganized. This usually happens when a company is in financial distress or wants to change its capital structure.
External Reconstruction: The existing company is liquidated, and a new company is formed to take over its business.
Internal Reconstruction (Capital Reduction): The company continues its legal existence but alters its capital structure (e.g., reducing the face value of shares) to write off accumulated losses.
Purpose: To give the company a "fresh start" by aligning its assets with its true market value and simplifying its balance sheet.
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