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In external reconstruction, the existing company is:
AContinued as before
BMerged into a foreign entity
CLiquidated and a new company is formed
DConverted to LLP
Answer & Solution
Correct answer: C. Liquidated and a new company is formed
1. Step 1: Per Ch 14, external reconstruction = existing company liquidated → new company formed with substantially same shareholders.
2. Step 2: It is essentially an amalgamation in the nature of merger.
3. Step 3: Hence (B).
_Source: ICAI BoS CA Inter Paper 1, Ch 14 "Internal Reconstruction"_