Under what circumstances can a company issue shares at a discount?

(2A) Notwithstanding anything contained in sub-sections (1) and (2), a company may issue shares at a discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan or debt restructuring scheme in accordance with any guidelines or directions or regulations specified by the …

Can a company issue shares on discount?

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.

Why would a company sell shares at a discount?

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.

Why are shares issued at discount illegal?

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.

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Can a company issue shares at discount under Companies Act 2013?

Section 53 of Companies Act, 2013 – Prohibition on Issue of Shares at Discount. (1) Except as provided in section 54, a company shall not issue shares at a discount.

When a share is at discount?

Definition: A discount on stock occurs when the stock’s par value is higher than the issuing price. The difference between the greater par value and the lesser issue price is considered the discount. This represents the amount of the par value that investors were unwilling to pay for when the stock was issued.

What does share discount mean?

The discount is the amount by which the share price is lower than net asset value, expressed as a percentage. In plain terms, it is a measure of the popularity of an investment company. Shares in investment companies often trade at a price different from the value of the underlying net assets.

Why must companies not allot shares at a discount?

This regime is largely designed to protect creditors. In theory, a creditor should be able to review a company’s statement of capital to check whether their capital assets will cover their liabilities. If shares are allotted at a discount the share capital figure will not accurately reflect the real position.