Assignment #1

Explain shares issued at premium and at discount, with reference

to relevant sections of company act 2017
81. Application of premium received on issue of shares. —
(1) If a company issues shares at a premium, whether for cash or
otherwise, a sum equal to the aggregate amount or the value of the
premiums on those shares must be transferred to an account, called
“the share premium account”.
(2) Where, on issuing shares, a company has transferred a sum to the
share premium account, it may use that sum to write off—
a) the preliminary expenses of the company;
b) the expenses of, or the commission paid or discount allowed on,
any issue of shares of the company; and
c) in providing for the premium payable on the redemption of any
redeemable preference shares of the company.
(3) The company may also use the share premium account to issue
bonus shares to its members.
82. Power to issue shares at a discount. —
(l) Subject to the provisions of this section, it shall be lawful for a
company to issue shares in the company at a discount:
Provided that—
(a) the issue of shares at a discount must be authorized by special
resolution passed in the general meeting of the company;
(b) the resolution must specify the number of shares to be issued, rate
of discount, not exceeding the limits permissible under this section
and price per share proposed to be issued;
(c) in case of listed companies discount shall only be allowed if the
market price is lower than the par value of the shares for a continuous
period of past ninety trading days immediately preceding the date of
announcement by the board; and
(d) the issue of shares at discount must be sanctioned by the
Commission:
Provided further that approval of the Commission shall not be
required by a listed company for issuing shares at a discount if the
discounted price is not less than ninety percent of the par value;
(e) no such resolution for issuance of shares at discount shall be
sanctioned by the Commission if the offer price per share, specified in
the resolution, is less than-
I. in case of listed companies, ninety percent of volume weighted
average daily closing price of shares for ninety days prior to the
announcement of discount issue; or
II. in case of other than listed companies, the breakup value per
share based on assets (revalued not later than 3 years) or per
share value based on discounted cash flow:
Provided that the calculation arrived at, for the purpose of subclause
(i) or (ii) of clause
(e) above, shall be certified by the statutory auditor;
(f) directors and sponsors of listed companies shall be required to
subscribe their portion of proposed issue at volume weighted average
daily closing price of shares for ninety days prior to the
announcement of discount issue;
(g) not less than three years have elapsed since the date on which the
company was entitled to commence business;
(h) the share at a discount must be issued within sixty days after the
date on which the issue is sanctioned by the Commission or within
such extended time as the Commission may allow.
(2) Where a company has passed a special resolution authorizing the
issue of shares at a discount, it shall apply to the Commission where
applicable, for an order sanctioning the issue. The Commission on
such application may, if, having regard to all the circumstances of the
case, thinks proper so to do, make an order sanctioning the issue of
shares at discount subject to such terms and conditions as it deems fit.
(3) Issue of shares at a discount shall not be deemed to be reduction of
capital.
(4) Every prospectus relating to the issue of shares, and every
statement of financial position issued by the company subsequent to
the issue of shares, shall contain particulars of the discount allowed
on the issue of the shares.
(5) Any violation of this section shall be an offence liable to a penalty
of level 3 on the standard scale.