Reconstruction - take-over bid, Business Law and Ethics

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Reconstruction Under S.280:

The essential features of this type of reconstruction have been described at 8.2.1(b).  It is subject to several disadvantages and is little used.  But when a reconstruction takes this form s.280 procedure must be followed so that a dissenting minority does have the appropriate safeguard.

  This procedure applies to a company which is proposed to be or is in course of being wound up voluntarily.  A company in liquidation must dispose of its assets (other than cash) by sale in order to pay its debts and distribute any surplus to its members.  The special feature of a s.280 reconstruction is that the business or property of Company P is transferred to Company Q in exchange for shares of the latter company which are allotted direct or distributed by the liquidator to members of Company P.  Obviously the creditors of Company P will have to be paid in cash.  A dissenting minority of members of Company P can also require to be paid in cash.  Hence substantial sums may have to be found in cash.  This is one of the drawbacks.


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