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CSEET · Fundamentals of Accounting · Introduction to Company Accounts

Under the Companies Act, 2013, what is the legal position of a share issued by a company at a discount, apart from the specific exception for conversion of debt of creditors under a resolution plan or debt restructuring scheme?

A share issued at a discount is void. The Companies Act, 2013 prohibits discounted issues, with a narrow exception for converting creditors' debt under a statutory resolution plan or RBI-guided restructuring scheme. Shareholder approval or a small discount percentage does not make such a share valid.

  1. AIt is voidCorrect
  2. BIt is valid if shareholders approve by special resolution
  3. CIt is valid if the discount does not exceed 10 per cent
  4. DIt is voidable only at the option of the company

Explanation

Section 53 prohibits issue of shares at a discount and says any share issued at a discount shall be void. The exception allows discount to creditors on debt conversion under an RBI-guided plan or scheme. No shareholder approval or percentage limit validates other discounted issues.

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