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CA Foundation · Business Laws · The Companies Act, 2013

Ananya Pharma Ltd, a public company, wants to issue shares at a discount to its existing shareholders to improve liquidity. Under the Companies Act, 2013, what is the general position on issuing shares at a discount?

A company cannot issue shares at a discount under the Companies Act, 2013, and any such issue is void. The exception is sweat equity shares issued to directors or employees. Shareholder approval cannot validate a discounted issue of ordinary shares.

  1. AAllowed up to 10% of face value with board approval
  2. BAllowed if the shareholders pass a special resolution
  3. CProhibited, and any such issue is void, except sweat equity sharesCorrect
  4. DAllowed only for the first issue after incorporation

Explanation

The Act prohibits a company from issuing shares at a discount, and any such issue is void. The only notable exception is sweat equity shares issued under the Act's conditions. A shareholder resolution cannot validate a discounted issue, so the special resolution option is wrong.

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