The issue of shares at a discount means the issue of the shares at a price less than the face value of the share. … The issue of Share at Discount is always below the Nominal Value (NV) of the shares. The company debits it to a separate account called ‘Discount on Issue of Share’ Account.
What is meant by issue of shares at premium and at discount?
Issue of Shares for Consideration other than cash or for cash or on capitalization of reserves. … Issue of Shares at par i.e. at face value or at nominal value. Issue of Shares at Premium i.e. at more than face value. Issue of Shares at Discount i.e. at less than the face value.
When can a company issue shares at a discount?
As per companies Act 2013, a company shall not issue shares at a discount except as provided in section 54 for issue of sweat equity shares. Any share issued by a company at a discounted price shall be void.
What type of shares can be issued at discount?
Also, debentures and bonds are allowed to be issued at discount as only shares apart from sweat equity shares is allowed for discount.
Why is issuing of shares at discount illegal?
Discounted prices may be offered when company is not able to pay its debts and offering it share to its creditors. Company Act 2013 strictly prohibited the companies to issue shares at discounted price. It invites penalty and imprisonment for directors. … So never think of discounted price.
Who can issue bonus shares?
1) Bonus shares can be issued by a company only if the Articles of Association of the company authorizes a bonus issue. Where there is no provision in this regard in the articles, they must be amended by passing special resolution act at the general meeting of the company.
Can we issue shares at premium?
Companies can issue shares at face value of the share, while there is an option to issue shares at a value which is more than the face value/par value or nominal value of the shares. … Such type of share issue is known as issue of shares at premium.
Can you issue shares at a discount?
And it is an absolute rule that a share cannot be issued fully paid for anything less than its nominal value – that is, it cannot be issued at a discount. A company cannot issue a £1 share fully paid for 99p or less.
Can companies issue shares at a discount?
Every share has a nominal (or par) value. It may be a £1 share or a 10p share, or whatever. The nominal value is usually expressed in sterling, but can be in any currency. A company may not issue any share at a discount, i.e. may not sell it for less than its nominal value: CA 2006, sec580.
What is fair share price?
Fair value refers to the actual value of an asset – a product, stock. … For example, Company A sells its stocks to company B at $30 per share. Company B’s owner thinks he could sell the stock at $50 per share once he acquires it and so decides to buy a million shares at the original price.
Can CCPS be issued at discount?
53 of the Act. It clearly prohibits the issue of shares at discount as it states in its clause (2) that any share (which means either equity share or preference share) issued by a company at a discounted price shall be void.
Why do companies not issue shares at discount?
However, companies are permitted to issue Sweat Equity Share in terms with the provisions of Section 54 of the Act. As per the provisions of Section 53 of the Act, there are prohibitions on companies to issue the shares on discount. Therefore, a Company cannot issue shares at discount.
Why shares are listed at discount?
A stock typically gets a good listing if the response of all the 3 segments of the IPO investors; retail, non-institutional and QIB to be robust. … Aggressive pricing of the IPO This is one of the most common reasons for an IPO listing at a discount to the issue price.