Skip to content

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

Under the Companies Act, 2013, what is the legal position of a share that a company issues at a discount, outside the exceptions provided in the Act?

A share issued at a discount, outside the permitted exceptions, is void under section 53 of the Companies Act, 2013. It is not voidable and cannot be validated by a special resolution. The company and officers in default also face a penalty and must refund the money with interest.

  1. AThe share is voidable at the option of the allottee
  2. BThe share is valid, but the discount must be written off within five years
  3. CThe share is voidCorrect
  4. DThe share is valid if shareholders pass a special resolution

Explanation

Section 53 prohibits issue of shares at a discount except as provided in section 54, and states that any share issued at a discount shall be void. It is not merely voidable, and no special resolution can validate it. The penalty and refund with interest are additional consequences.

Did you get it right without looking?

One question tells you little. A timed set on Accounting for Share Capital shows your real accuracy, how long you take and where you lose marks.

Practise Accounting for Share CapitalFree diagnostic mock

More Accounting for Share Capital questions