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CS Professional · Drafting, Pleadings and Appearances · Art of Opinion Writing

Kaveri Foods Pvt Ltd's board wants an opinion on whether it may issue shares at a discount. The company secretary finds the Companies Act, 2013 permits only sweat equity shares at a discount, subject to conditions, and no general discount issue. Which approach to the opinion is correct?

The opinion should state the statutory prohibition on discounted issue, identify the sweat equity exception with its conditions, and conclude that an ordinary issue at a discount is not permissible. Consent of directors or the articles cannot override the Act.

  1. AGive the opinion that discount issue is allowed if all directors agree
  2. BDecline to give any view because the law is restrictive
  3. CState the general prohibition, the sweat equity exception and its conditions, and conclude that an ordinary discount issue is not permissibleCorrect
  4. DConclude that it is permitted if the articles allow it

Explanation

An opinion must apply the statute to the facts, noting the rule and the exception. Board or articles consent cannot override a statutory prohibition, so those options are wrong. Declining to opine fails the duty of advising the client.

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