What is "Internal Reconstruction"? State the methods of internal reconstruction.

Meaning of Internal Reconstruction: When the company reconstructs its financial structure internally without undergoing liquidation, it is internal reconstruction. Under this scheme company continues its legal existence. A scheme of re-organisation is prepared in which all parties sacrifice. It also means the reduction of capital to cancel any paid up share capital which is lost or not represented by available assets. This is done to write off the losses of the company. Methods of internal reconstruction There are various steps of internal reconstruction which are defined in financial accounting. For properly deploying the process of internal reconstruction, following methods are generally employed or used simultaneously. Alteration of share capital Variation of Shareholder's Rights Reduction of Share Capital Compromise/ Arrangement Surrender of Shares