Internal vs External Reconstruction Differences

Every 20 years, Buddhist temples are reconstructed. The idea of reconstruction is to create something new that would serve the world better. The approach is similar when it comes down to internal and external reconstruction.

When businesses get started, they’re not perfect. The founders learn as they grow. As a result, it becomes important sometimes to reconstruct the existence of the businesses. Some completely change the idea of business and create a new one. Some prefer to stick to the old and rebuild the internal processes.

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No matter what reconstruction it is, it’s important to renovate, recreate, and reassume the business processes and visions as businesses grow.

Internal vs External Reconstruction Infographics

Key Differences Between Internal and External Reconstruction

  • Internal reconstruction needs a lot of time and statutory requirements because, in internal reconstruction, the company has to take the permission of every stakeholder and the court. On the other hand, external rebuilding can be done immediately without consent from the court.Both of these reconstructions ensure changes in financial structureFinancial StructureThe financial structure refers to the sources of capital and the proportion of financing that comes from short term liabilities, short term debt, long term debt, and equity to fund the company’s long term and short term working capital requirements.read more. But since internal reconstruction doesn’t liquidate, things become difficult.In the case of internal reconstruction, the company’s losses can be set off against the company’s future profit. In the case of external reconstruction, the losses of an old company can’t be set off against the profit of the new company.Internal reconstruction is done when there is a chance for the existing company to bounce back. External reconstruction is done to start the whole thing afresh.The accounting required for both internal reconstruction and external reconstruction is complex.

Comparative Table

Conclusion

Internal and external reconstruction is valid for companies that want to reconsider their approach and future strategy. Both of these depend on the decision and the permission of the stakeholders involved in the whole process.

However, both of these processes are much more complex than perceived. But if you want to start afresh and your stakeholders are with you, you can be better off by taking the path of external reconstruction since no permission is required from a court in the case of external reconstruction.

This has been a guide to Internal vs External Reconstruction. Here we discuss the top differences between internal and external reconstruction along with infographics and comparative table. You may also have a look at these following articles –

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