RECONSTRUCTION of a company is a method frequently adopted in order to extend or alter its objects or to obtain further working capital. Unless the company has power under its memorandum to sell all its assets as a going concern to another company, and to take payment therefor in cash or shares, a reconstruction is only possible in accordance with the provisions of the Companies Consolidation Act, 1908. These sections are set out below. It may be remarked, however, in connection therewith, that a shareholder who neither assents nor dissents to a proposed recon struction may obtain no share in it when effected ; but no shareholder is compelled to accept a reconstruction scheme, for he then has the • right to abandon his shares in the reconstructing company ; nor is he bound to accept shares in the new company and thereby incur, if they are issued only partly paid up, a liability for calls thereon.
The company to be reconstructed must first go into liquidation. Then when it is in the course of being wound up altogether voluntarily, and the whole or a portion of its business or property is proposed to be transferred or sold to another company, the liquidators (with the sanction of a special resolution of the reconstructing company, conferring either a general authority upon them, or an authority in respect of any particular arrangement), may receive in compensation or part compensation for such transfer or sale shares, policies, or other like interests in the other company, for the purpose of distribution amongst the members of the reconstructing company, or they may enter into any other arrangement whereby the members of that company may, in lieu of receiving cash, shares, policies, or other like interests, or in addition thereto, participate in the profits of or receive any other benefit from the purchasing company. Any sale made or arrangement entered into by the liquidators in pursuance of this section is binding on the members of the reconstructing company ; subject, however, to this proviso, that if any member of the reconstructing company who has not voted in favour of the special resolution passed by his company at either of the meetings held for passing it expresses his dissent from any such special resolution in writing addressed to the liquidators or one of them, and left at the registered office of the company not later than seven days after the date of the meeting at which resolution was passed, be may require the liquidators to do one of certain things as they may prefer. These things are :
either to abstain from carrying the resolution into effect ; or to purchase the interest he holds at a price to be determined in manner hereinafter mentioned, such purchase-money to be paid before the company is dissolved, and to be raised by the liquidators in such manner as may be determined by special resolution. No special resolution is invalid for the purposes of this section by reason that it is passed antecedently to or concurrently with any resolution for winding-up the company, or for appointing liquidators ; but if an order is made within a year for winding-up the company by or subject to the supervision of the Court, the resolution is not valid unless sanctioned by the Court. The price to be paid for the purchase of the interest of any dissentient member may be determined by agreement. If, however, the parties dispute about it the dispute must be settled by arbitration, and for the purposes of the arbitration the provisions of " The Companies Clauses Consolidation Act, 1845," with respect to the settlement of disputes by arbitration, are incorporated with the Companies Acts. See LIQUIDATION.