Issue of Shares at Discount:
Legal Provision: A company can issue a share at a discount (i.e. for a consideration less than the nominal value of the shares) subject to the following conditions laid down by Section 79 of the Companies Act.
- Shares to be issued at discount must be of a CLASS already issued.
- Issue of shares at a discount must be authorized by an ordinary resolution of the company.
- Issue must be sanctioned by the Company Law Board
- Resolution must specify the maximum rate of discount. No such resolution shall be sanctioned by the Company Law Board, if the maximum rate of discount specifies in the resolution exceeds 10%, unless the board is of the opinion that a higher percentage of discount may be allowed in case of certain special circumstances.
- One year must have passed since the date at which the company was allowed to commence business.
- Issue must take place within two months after the date of the sanction of the Company Law Board, unless the time is further extended.
- Every prospectus related to the issue of share shall disclose particulars of the discount allowed on the issue of shares or that amount which has not been written off at the date of the issue of prospectus.
WHAT IS MEANT BY CLASS OF SHARE???
PLZ EXPLAIN?
THANKS IN ADVANCE!
-Ankit Mehta
CAclubindia
