Issue of shares at a discount is a principal prohibited. … – The shares must belong to a class already issued the company. – The issue must be authorized a resolution of the general meeting. – The resolution of the general meeting must specify the maximum rate of discount at which the shares are to be issued.
Discounted prices may be offered when company is not able to pay its debts and offering it share to its creditors. Company Act 2013 strictly prohibited the companies to issue shares at discounted price. It invites penalty and imprisonment for directors. … So never think of discounted price.
The legal restriction of selling the shares at such a discounted rate is in effect to safeguard the interest of the creditors of the company. The discounted share may result in a deficiency in company capital and shortage of assets. The assets are needed to pay the debt in case of insolvency.
(iv) the shares to be issued at a discount are issued within two months after the date on which the issue is sanctioned by the 3 Company Law Board] or within such extended time as the 3 Company Law Board] may allow.
As per companies Act 2013, a company shall not issue shares at a discount except as provided in section 54 for issue of sweat equity shares. Any share issued by a company at a discounted price shall be void.
It clearly prohibits the issue of shares at discount as it states in its clause (2) that any share (which means either equity share or preference share) issued by a company at a discounted price shall be void.
The maximum rate of discount must not exceed 10% or such rate as the company law board may permit. The shares to be issued at a discount must be issued within two months of the sanction by the company law board or within such extended time as the company law board may allow.
(1) A company’s shares must not be allotted at a discount. (2) If shares are allotted in contravention of this section, the allottee is liable to pay the company an amount equal to the amount of the discount, with interest at the appropriate rate.
Correct answer is: (C) Issued as sweat equity.