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Internal reconstruction differs from external reconstruction primarily in that:
AThe existing company is liquidated in internal reconstruction
BThere is no reduction of capital in internal reconstruction
CThe existing company is NOT liquidated in internal reconstruction
DExternal reconstruction needs court approval
Answer & Solution
Correct answer: C. The existing company is NOT liquidated in internal reconstruction
1. Step 1: Per Ch 14, internal reconstruction keeps the existing company alive; only the capital/debt structure is changed.
2. Step 2: External reconstruction liquidates the existing company and forms a new one with the same shareholders.
3. Step 3: Hence (B).
_Source: ICAI BoS CA Inter Paper 1, Ch 14 "Internal Reconstruction"_