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Question
Long Answer Question
State clearly the conditions under which a company can issue shares at a discount.
Solution
As per the Section 79 of the Company Act of 1956, following are the conditions under which a company can issue shares at a discount.
1. A company can issue shares at discount provided it has previously issued such type of shares.
2. The issue of shares at a discount is authorised by a resolution passed by the company in the General Meeting and sanction obtained from the Company Law Tribunal.
3. The resolution specifies that the maximum rate of discount is 10% of the face value of the shares, unless higher percentage of discount allowed by the Company Law Tribunal.
4. A company can issue shares at discount atleast after one year from the date of commencing business.
5. If a company wants to issue shares at discount, then it must issue them within two months of obtaining sanction from the Company Law Tribunal.
6. Every prospectus related to the issue of the shares should explicitly and clearly contain particulars of the discount allowed on the issue of shares.
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