Question

Issue of New shares under Section 80 __________.

• A. always constitutes an increase of authorised share capital
• B. never constitutes an increase of authorised share capital
• C. does not constitute an increase of authorised share capital if the old shares are redeemed within 1 month after the issue of new shares
• D. constitutes an increase of authorised share capital if the old shares are redeemed within 1 month after the issue of new shares

Answer 1

The correct option is C does not constitute an increase of authorised share capital if the old shares are redeemed within 1 month after the issue of new shares

The section 80 under companies act 2013 states that when new shares are issued, there may arise a case when the authorised capital of the company may not increase. This happens when the old equity shares are redeemed within the time period of 1 month after issue of those new equity shares.

If the old equity is not redeemed before the issue of new equity then overcapitalisation may occur in the company wherein the companywill be having issued equity shares more than shares authorized in the frim's documents and it is an illegal work as per the laws.

Thus the option C fits right into the category of section 80.