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CS Executive · Corporate Accounting and Financial Management · Accounting for Share Capital

Under section 53 of the Companies Act, 2013, a company issues shares at a discount in a case not covered by any exception. What additional consequence follows for the company besides the penalty?

The company must refund all monies received, with interest at twelve per cent per annum from the date of issue, to the allottees, in addition to the penalty under section 53(3) of the Companies Act, 2013. The shares are void, so there is no option to retain them.

  1. AIt must refund all monies received with interest at 12 per cent per annum from the date of issueCorrect
  2. BIt must cancel the shares and pay interest at 6 per cent per annum
  3. CIt must transfer the discount to the Capital Redemption Reserve
  4. DIt must offer the shares again at par to the same persons without refund

Explanation

Section 53(3) provides that the company is liable to a penalty and must also refund all monies received with interest at twelve per cent per annum from the date of issue to the persons to whom the shares were issued. The other options describe consequences not found in the section.

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