The capital reconstruction scheme is commonly performed during financial difficulties. The objective is to ensure that all stakeholders (Creditors, loan providers and shareholders) receive the amount owed by the entity.
Actually, the liability of the business towards the loan providers, creditors and shareholders is limited to the book value. The business is not liable to pay the market values to these parties. In order to repay them, the most obvious option is to sell the assets. These assets will be sold at the market value, so we take their market value into account. However, the business only needs to repay the book values of the equity and the debt, so we take their book values.