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Issue of shares at discount

A company may issue shares at a discount i.e at a value below its par value. The following conditions must be satisfied in connection with the issue of shares at a discount :-

  1. The shares must be of a class already issued

  2. Issue of the shares at discount must be authorised by resolution passed in the general meeting of company and sanctioned by the company law board.

  3. The resolution must also specify the maximum rate of discount at which the shares are to be issued

  4. Not less than one year has elapsed from the date on which the company was entitled to commence the business.

  5. The shares to be issued at discount must issued within 2 months after the date on which issue is sanctioned by the company law board or within extended as may be allowed by the Company Law Board.

  6. The discount must not exceed 10 percent unless the Company Law Board is of the opinion that the higher percentage of discount may be allowed in special circumstances of case.

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Q: Discount on issue of shares and debentures?
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Discount on issue of debentures is a?

capital loss to be written off over the tenure of the debentures .


What Advantages does issue of debentures over equity shares?

Cost is the major advantage. Debentures are to be serviced for the contracted period of time, while equity servicing is perennial.


Which companies issue share in discount?

Companies who are in the market from long period of time can issue shares at discount.


When debentures are issued at discount it is prudent to write off the discount?

when debentures are issued at discount, it is prudent to write off the discount


When debentures are issued at a discount it is prudent to write off the discount?

when debentures are issued at discount, it is prudent to write off the discount


Why issue rights issue of shares at a discount?

when shares aree issued at a lower than the face value they are said to be issue of share at discount. the main reason behind issuing share is to attract retailer


Under what conditions may the directors of acompany prefer to issue ordinary shares rather than debentures?

ordinary shares are equity whereas debentures are debt - debt is always payable, whereas, equity holders do not always necessarily demand a dividend payment immediately. it would depend on what the company wanted to use the funds for. if the funds were used to fund a project where the returns were not expected for a few years, a company may wish to issue shares rather than debentures as the debentures would have to be paid regardless of when the returns came.


What is Source and application of funds?

sources of Funds 1. Profit from Operations 2. Issue of Shares 3. Issue of Debentures 4. Bank Loan (Long Term) 5. Sale of fixed Assets Application of Funds 1. Expense for operations 2. Redemption of shares 3. Redemption of Debentures 4. Payment of Loans 5. Purchase of Assets


Give few examples of Miscelleneous expense?

preliminary expenses, discount on issue of shares


What is the journal entry for redemption of debentures which were issued at discount?

debit redemption of debentures accountcredit cash / bank


Who are the clients of reuters?

* The financial Institutions. * The Corporates who issue shares and debentures or bonds etc. * The media agencies and broadcasters. * And last but not the least the Investors in the Financial Markets.


Can New company issue share at discount?

Most of the time, the new companies will offer their shares at discount prices. There is no law that governs/controls the prices at which the company can offer their shares to people for sale.