FAR 450

COMPANY RECONSTRUCTION
GROUP PROJECT

PREPARED BY :

KHAIRUL EFANDY BIN BAHARI

2009653362

NORHASIMAH BINTI HAMZAH

2009887498

WAN NOOR SYAZWANI BINTI WAN OMAR

2009464866

PREPARED FOR :
PN. WAN MADIHAH WAN ZAKIUDDIN

INTERNAL RECONSTRUCTION SCHEME

GOING CONCERN

LIQUIDATION

Freehold Land (-6 500 000)

6 040 000

1 060 000

Motor Vehicle

4 500 000

2 500 000

Fixtures & Fittings

1 000 000

750 000

Inventory & Work In Progress

600 000

500 000

Trade Receivables & Prepayment

280 000

230 000

12 420 000

5 040 000

*The value of asset as a going concern is higher than liquidation

Value of asset under liquidation

5 040 000

LESS: secured creditors (0.4x 2 100 000)

(840 000)

Bank overdraft

(1 800 000)

Debentures holder

(250 000)

Preference shareholders

(3 300 000)

Deficit to unsecured creditor & ordinary shareholder

(1 150 000)

If the company is liquidated, the assets are not sufficient even to pay off unsecured creditors. This
means that shareholders will get nothing from the company. Preference shareholders may be expected
to agree on reconstruction scheme since assets on liquidation may only cover 65% of their claim. An
internal reconstructions scheme more appropriate for the benefit of all affected parties.

Determine the value of losses to be written off.

Profit and loss

7 270 000

Land & Buildings (increase in value)

(2 400 000)

Motor vehicles

790 000

Fixtures & Fittings

200 000

Inventory & WIP

100 000

Trade Receivables

50 000

Goodwill

540 000

Research & Development

1 200 000

Preference dividend in arrears

792 000

Cost of reconstruction

150 000
8 692 000

Determine the reduction in capital shares and others claim by all the parties.
REDUCTION IN CLAIMS

AMOUNT (RM)

AMOUNT (RM)

Preference dividend

792 000

100

792 000

Ordinary shareholders

8 000 000

70

5 600 000

Preference shareholders

3 300 000

30

990 000

Creditors (0.6x2 100 000)

1 260 000

50

63 000

Share Premium

1 000 000

100

1000 000

Debentures interest

250 000

100

250 000

Debenture holders

6 500 000

0
8 695 000

LESS: total accumulated Loss

8 692 000

CAPITAL RESERVE

3 000

THE CAPITAL RECONSTRUCTION SCHEME PROPOSAL

1) The nominal value of the OS is to be reduced to RM0.30 per share and the PS is to be reduced to
RM0.70 per share. The reduce is then to be consolidated to the original par value.
2) The share premium is to be utilized for the scheme and the PS dividend is to waive off their
right.
3) To write off debentures interest and the debit balance of profit and loss account.
4) The unsecured creditors are to reduce their claim by RM63 000.
5) The company needs RM990 000 to pay reconstruction cost and preferential creditors. The
amount is raised by issuing 600 000 units of right issues of 1 share for every 4 share held at
RM1.65 per share.
6) The following assets were revalued as follows:
RM
Freehold Land and Buildings

12 540 000

Motor Vehicle

4 500 000

Fixtures & Fittings

1 000 000

Inventory & WIP

600 000

Trade Receivables and Prepayments

280 000

7) The remaining RM2 310 000 of 8% Cumulative Redeemable Preference Shareholders of RM1 per
share have convert to 5% Cumulative Preference Share of RM1 per share.

SimePathy Bhd
Balance Sheet as at 30 June 2010
RM
NON CURRENT ASSETS
freehold land & building
motor vehicle
fixture & fitting

RM

12,540,000
4,500,000
1,000,000
18,040,000

CURRENT ASSETS
inventory & work in progress
trade receivable and prepayment
bank

600,000
280,000
940,000

OWNER EQUITY'S
ordinary share
RESERVE
capital reserve
share premium

1,820,000
19,860,000

3,000,000

3,000
390,000
393,000

NON CURRENT LIABILITIES

10% debentures
5% non cumulative preference share of RM 1 each

6,500,000
2,310,000
8,810,000

CURRENT LIABILITIES
account payable
taxation payable
bank overdraft
director loan
accruals

2,037,000
420,000
1,800,000
300,000
3,000,000
7,557,000
19,760,000

To calculated gearing ratio before reconstruction and after reconstruction.

Capital employed

Before
reconstruction (RM)

After
reconstruction
(RM)

Ordinary Share capital

8000000

3000000

Profit & Loss

(7270000)

Share Premium

1000000

390000

1730000

3390000

Preference Share

3300000

2310000

10% debentures

6500000

6500000

11530000

12200000

3300000 + 6500000
11530000

3300000 +
6500000
12200000

=85%

=80%

Gearing ratio

As the result of the reconstruction scheme the level of gearing ratio of the company has
significantly decrease from 85% to 80%. The companies now have become less risky if compare
before the reconstruction. However the company should improve its performance in the future
in order to reward its shareholders who may make a large sacrifice for the survival of the
company.

Liquidity position
Current ratio

current asset x
Current liabilities

100

rm 1030000
Rm 7870000

100

current asset x
Current liabilities

100

rm 1820000
Rm 757000

100

24.08%

= 13.09%
After reconsruction
Current ratio

Financial viability
Total asset
Non current asset
Current asset

Total liability
Non current liability
Current liability

Shareholder Equity
OSC
Capital reserve
Share Premium

rm 000
18040000
1820000
19860000

8810000
7557000
16367000

3000000
3000
390000
3393000

Debt ratio

total liabilities =
Total asset

16367000
19860000

82.41%

Debt capital ratio

total liabilities =
Shareholder
Equity

16367000
3393000

4.82

The company has use more debt than equity to finance the operation after reconstruction
scheme. The company has more liability that the company responsible t settle in the future.