Reconstruc-
tion under
s. 234.

210

SECRETARIAL PRACTICE
company if sanctioned by an extraordinary resolution, and
on the creditors if acceded to by three fourths in number and
value of the creditors, subject to an appeal to the Court within
three weeks by any creditor or contributory. Since the
required majority of creditors is more difficult to obtain than
that required in the case of an arrangement under s. 153,
and, further, since there is no power to bind classes of creditors,
it is almost always better to proceed under s. 153 (see p. 222).

Of the remaining methods of reconstruction mentioned
above, 2, 4 and 6 are by far the most important, but it will be
necessary later to deal shortly with 3. It may be stated at
the outset, that though the basis of most reconstructions
is either s. 234 or s. 153 of the Act, yet in a very large num-
ber of cases the scheme is complicated by various other
elements, e.g. subdivision of shares, or reduction of capital.
[f a reduction of capital is included in a scheme, the provisions
of the Act relating to reduction must be strictly complied with,
and the reduction cannot be effected merely by obtaining the
sanction of the Court to the reduction as part of the scheme
"Cooper, Cooper and Johnson (1902), 51 W.R. 314]. It is not
possible here to deal in detail with complex schemes of the
nature just indicated.

Reconstruction under s. 234 involving the formation of a
new company is frequently resorted to, when it is desired to
obtain further working capital and the ordinary means of so
doing are impracticable. But it may also be utilised for
various other purposes, e.g. as an alternative to a petition for
reduction, or for alteration of objects, or to obtain enlarged
powers when the case is not within s. 5 of the Act, or to effect
an alteration in the respective rights of more than one class
of shareholders when these are fixed by the memorandum.
The expense involved in registering a new company, which the
new capital duty greatly increased, discouraged reconstruc-
tions of this class when other means were available, but this
objection has largely disappeared since s. 55 of the Finance
Act, 1927, as amended by s. 31 of the Finance Act, 1928, came
into force. See Appendix L. If it is desired to take advan-
tage of this section, care must be taken to see that the requisite
conditions are complied with, not only in the scheme as
formulated [sub-s. (1)], but also in the scheme as carried out
[sub-s. (6)]. If letters of renunciation are used, it may be
impossible to prove that the scheme as carried out has com-
plied with sub-s. (1) as it is doubtful whether allotment
without registration amounts to an ‘issue of shares.” Thedrafts-
men of the necessary documents must also bear in mind the
provisions of sub-s. (3) as to the form of the documents.