Question

A company may issue shares at a discount in a class already issued, if ________________.

• A. it is authorised by a resolution passed at the General Meeting and approved by the Company Law Board
• B. at least one year has elapsed since the receipt of the certificate to commence business
• C. the particulars of the discount allowed on the issue of shares are clearly mentioned in the prospectus issued
• D. all the above conditions are fulfilled

Answer 1

The correct option is D all the above conditions are fulfilled

1. In order to issue the shares at a price less than the face value, the company has to get permission from the relevant authority. For seeking permission, they should call and upon a general meeting and discuss and authorize the matter in that meeting.
2. There is a cap on the rate of discount. A company cannot issue any shares at more than 10% discount.
3. The company should issue the shares within 60 days of receiving permission from the relevant authority. In certain cases, the company can extend this time frame after getting permission in the permission.
4. The company cannot issue these shares before passing of 1 year from the date of commencement of business.
5. The shares must belong to the same class of shares which are already available in the market. For example, if the has previously issued Equity shares then this time also, the company has to issue Equity shares only.
6. Also, the company has to acquire the sanction by the Central Government after getting approval from the general meeting.