Question

State the prerequisites to be compiled with by the company for the issues of shares at discount

Answer 1

Situations where a company can issue shares at discount

Explanation:

• As per the provisions of Section 53(2) of Companies Act,2013,a company cannot issue shares(whether equity or preference) at a discounted price.Such issue will be considered as void.

• If the company issues shares at discount,then as per Section53(2) clause 3,the company or any office in default shall pay the penalty of an amount either equal to the amount raised through such issue or 5 lakh rupees,whichever is less.

• The company shall also be liable to refund all the monies it had raised via such issue along with interest @12% p.a.

However,In the following cases,the company can issue shares at discount -

• Issue of Sweat Equity shares: These shares are issued by the company to their employees or directors as a reward for their efforts,hardwork,technical know-how,or making of intellectual property right(patents),etc.

• Issue of shares to creditors: The company can issue shares at discount to its creditors in order to comply with any statutory provisions such as Insolvency Bankruptcy Code,2016 or any statutory order from Reserve Bank of India.

• Issue of Right shares: The Company can issue right shares at a price lower than the market price of the shares in order to raise more money from their shareholders.

Answer 2

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Situations where a company can issue shares at discount

Explanation:

As per the provisions of Section 53(2) of Companies Act,2013,a company cannot issue shares(whether equity or preference) at a discounted price.Such issue will be considered as void.

If the company issues shares at discount,then as per Section53(2) clause 3,the company or any office in default shall pay the penalty of an amount either equal to the amount raised through such issue or 5 lakh rupees,whichever is less.

The company shall also be liable to refund all the monies it had raised via such issue along with interest @12% p.a.

However,In the following cases,the company can issue shares at discount -

Issue of Sweat Equity shares: These shares are issued by the company to their employees or directors as a reward for their efforts,hardwork,technical know-how,or making of intellectual property right(patents),etc.

Issue of shares to creditors: The company can issue shares at discount to its creditors in order to comply with any statutory provisions such as Insolvency Bankruptcy Code,2016 or any statutory order from Reserve Bank of India.

Issue of Right shares: The Company can issue right shares at a price lower than the market price of the shares in order to raise more money from their shareholders.