When an existing company is liquidated and a new company is formed with the same shareholders to take over its business, it is called __________.

Absorption

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External reconstruction

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Amalgamation

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Internal reconstruction

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Solution

The correct option is C External reconstruction
External reconstruction takes place when an existing company goes into liquidation for the purpose of selling its assets and liabilities to a newly formed company which is generally owned and named alike. External reconstruction is one in which the company undergoing reconstruction is liquidated to take over the business of existing company

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