Amalgamation Definition, What is Amalgamation, Advantages of Amalgamation, and Latest News

An amalgamation is a process of combining two or more companies to create a new company. The amalgamation is quite different from the merger, as all the companies involved in the process of amalgamation lose their previous identity to become a new entity. The newly formed entity holds the assets and liabilities of all combined companies.

The term amalgamation has generally fallen out of popular use in the United States, being replaced with terms like merger or consolidation, with which it can be synonymous. An amalgamation will be treated as “Amalgamation in the nature of purchase” if any of the above-mentioned conditions is not satisfied. CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing. The shareholders of the existing entities receive shares of the new entity created throughout the procedure. It is a merger where two businesses join forces to operate in the same industry or market but do not sell the same goods.

Meaning of amalgamation in English

Small businesses, holding companies, and corporations with 100% subsidiary ownership are eligible for a fast-track merger. Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting. The new company, known as ArcelorMittal, was created through the merger of two organisations, Mittal Steel and Arcelor. In the process, Mittal Steel and Arcelor Group both lost their identities. The absorbed or acquired company’s assets and liabilities are consolidated.

  • The absorbed or acquired company’s assets and liabilities are consolidated.
  • It is a mutual advantage shared between the acquired companies and the acquirer.
  • This process is a distinct form of a merger in which neither company that is involved survives as a legal entity and a completely new brand or legal entity is formed.
  • Assimilation refers to the process through which individuals and groups of differing heritages acquire the basic habits, attitudes, and mode of life of an embracing culture.
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  • Pooling of Interest Method is used for accounting in the books of transferee company.

The newly established entity’s balance sheet contains and transfers the assets and liabilities of the preexisting firms. Either directly or indirectly, a business takeover is a corporate tactic to acquire the target company’s management. Gaining control over the target company’s board of directors will enable the acquirer to make decisions more effectively.

While the term is rarely heard in the U.S. today, the practice continues both there and elsewhere around the world. Amalgamation can also refer to the combining of other types of organizations into a single one, such as nonprofit groups and entities in the public sector, including government agencies and municipalities. The excess of the purchase consideration over the share capital of transferor company is debited to Reserve and the excess of share capital over purchase consideration is Credited to reserve. The business of the transferor company is intended to be carried on, after amalgamation, by the transferee company.

Reasons to perform amalgamation

A merger and an amalgamation are different because neither business exists as a separate legal entity. Instead, a brand-new organisation is created to hold the merged assets and obligations of the two businesses. When amalgamation is affected, some or all the assets and liabilities of the vendor companies, are transferred to the vendee company. Similarly, the shareholders of the old entity turn out as the shareholders of the amalgamated entity.

The Procedure of Amalgamation

In this case, Amalgamation Adjust-went A/c is not to be opened far takeover of the statutory reserve. However, ownership of the absorbing corporation passes to the shareholders of the absorbed entity. The new entity gains the ownership of all the existing entities’ shareholders. As a merger of two firms creates a new entity, a minimum of three companies are needed.

How Amalgamations Work

In this case, the business of the transfer or company is intended to be carried on after the amalgamation. The other conditions that need to be fulfilled include that the shareholders of the vendor company holding atleast 90% face value of equity shares become the shareholders’ of the vendee company. There is a genuine pooling not merely of assets and liabilities of the amalgamating companies but also of the shareholder interest and surplus of the business of two companies. All the assets and liabilities including reserves and surplus of the transferor company, after amalgamation, become the assets and liabilities of the transferee company. Equity shareholders of the combining entities continue to have a proportional share in the combining entity.

An amalgamation is the combination of two or more companies into an entirely new entity. Amalgamations are distinct from acquisitions in that none of the companies involved in the transaction survives as a legal entity. Instead, a completely new entity, with the combined assets and liabilities of the former companies, is born.

Although both these types seem fairly similar, it is important to differentiate them and know the difference because both the types need different methods of accounting. The Companies Act of 2013 does not provide any criteria for companies to meet to merge. But it poses a few queries which need to be addressed by the firms involved. Tata Steel is the product of the merger of two organizations, UK-based Corus Group and Tata Steel. Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP.

This is why amalgamations generally take place between small and large companies where the larger one takes over the smaller one. The size of newly formed entities is more significant as compared to the companies that take part in the amalgamation. The amalgamation takes place between the companies that are part of the same market segment. The company with a smaller size (known as transferor company) is absorbed by the company with a larger size (known as the transferee company). As a result of which the customer base of the company increases along with the increased assets of the newly formed entity.

Since these businesses have similar distribution networks, production processes, or overlapping technologies, among other factors, mergers between these businesses typically increase market share and expand product lines. It is very uncommon to see the amalgamation of two or more companies of the same size. Amalgamation usually happens among one large company and a small company or several smaller companies, where the smaller company becomes part of a larger company to form a new entity. The dictionary meaning of amalgamation is combining two or more things to form a new thing. The definition of amalgamation remains the same in business terminology.

Can you solve 4 words at once?

The main objective of an amalgamation is to form a unique entity which rests on the business combination of the involved companies for a greater competitiveness. An amalgamation happens when two or more companies combine to form a completely new entity. This process is a distinct form of a merger in which neither company that is involved survives as a legal entity and a completely new brand or legal entity is formed. This new entity houses the combined assets and liabilities of both the involved companies. Corporate restructuring can help an organisation’s value be restored, preserved, or even increased.