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Under what conditions can a company issue its shares at a discount according to the Companies Act?
- a)Anytime during its operation
- b)Within the first year of commencement of business
- c)If it is a public company
- d)Only if the shareholders approve
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
Under what conditions can a company issue its shares at a discount acc...
According to Section 79 of the Companies Act, a company can issue its shares at a discount only if at least one year has elapsed from the date of commencement of business. It must also fulfill other conditions, including approval by shareholders and the court.
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Under what conditions can a company issue its shares at a discount acc...
Conditions for issuing shares at a discount according to the Companies Act
The Companies Act provides certain conditions under which a company is allowed to issue its shares at a discount. These conditions are as follows:
b) Within the first year of commencement of business
According to the Companies Act, a company is allowed to issue shares at a discount within the first year of commencement of its business. This means that the company can offer its shares to potential investors at a price lower than their nominal or face value. However, it is important to note that this provision is applicable only for the first year of the company's operation.
Explanation:
- The Companies Act allows a company to issue shares at a discount within the first year of its commencement of business to facilitate the initial capital raising process.
- This provision recognizes that newly incorporated companies may face challenges in raising capital and may require the flexibility to offer shares at a discount to attract investors.
- By allowing companies to issue shares at a discount, the Companies Act aims to promote investment in new ventures and encourage entrepreneurship.
- However, it is important to note that this provision is time-limited and only applicable for the first year of the company's operation. After the first year, the company is not allowed to issue shares at a discount unless specific approval is obtained from the shareholders.
Conclusion
In conclusion, according to the Companies Act, a company is allowed to issue its shares at a discount within the first year of commencement of its business. This provision is aimed at facilitating the initial capital raising process for newly incorporated companies. However, after the first year, the company is required to obtain approval from the shareholders in order to issue shares at a discount. It is important for companies to comply with the provisions of the Companies Act when issuing shares at a discount to ensure legal and regulatory compliance.
The Companies Act provides certain conditions under which a company is allowed to issue its shares at a discount. These conditions are as follows:
b) Within the first year of commencement of business
According to the Companies Act, a company is allowed to issue shares at a discount within the first year of commencement of its business. This means that the company can offer its shares to potential investors at a price lower than their nominal or face value. However, it is important to note that this provision is applicable only for the first year of the company's operation.
Explanation:
- The Companies Act allows a company to issue shares at a discount within the first year of its commencement of business to facilitate the initial capital raising process.
- This provision recognizes that newly incorporated companies may face challenges in raising capital and may require the flexibility to offer shares at a discount to attract investors.
- By allowing companies to issue shares at a discount, the Companies Act aims to promote investment in new ventures and encourage entrepreneurship.
- However, it is important to note that this provision is time-limited and only applicable for the first year of the company's operation. After the first year, the company is not allowed to issue shares at a discount unless specific approval is obtained from the shareholders.
Conclusion
In conclusion, according to the Companies Act, a company is allowed to issue its shares at a discount within the first year of commencement of its business. This provision is aimed at facilitating the initial capital raising process for newly incorporated companies. However, after the first year, the company is required to obtain approval from the shareholders in order to issue shares at a discount. It is important for companies to comply with the provisions of the Companies Act when issuing shares at a discount to ensure legal and regulatory compliance.
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Under what conditions can a company issue its shares at a discount according to the Companies Act?a)Anytime during its operationb)Within the first year of commencement of businessc)If it is a public companyd)Only if the shareholders approveCorrect answer is option 'B'. Can you explain this answer? for B Com 2025 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Under what conditions can a company issue its shares at a discount according to the Companies Act?a)Anytime during its operationb)Within the first year of commencement of businessc)If it is a public companyd)Only if the shareholders approveCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for B Com 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Under what conditions can a company issue its shares at a discount according to the Companies Act?a)Anytime during its operationb)Within the first year of commencement of businessc)If it is a public companyd)Only if the shareholders approveCorrect answer is option 'B'. Can you explain this answer?.
Under what conditions can a company issue its shares at a discount according to the Companies Act?a)Anytime during its operationb)Within the first year of commencement of businessc)If it is a public companyd)Only if the shareholders approveCorrect answer is option 'B'. Can you explain this answer? for B Com 2025 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Under what conditions can a company issue its shares at a discount according to the Companies Act?a)Anytime during its operationb)Within the first year of commencement of businessc)If it is a public companyd)Only if the shareholders approveCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for B Com 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Under what conditions can a company issue its shares at a discount according to the Companies Act?a)Anytime during its operationb)Within the first year of commencement of businessc)If it is a public companyd)Only if the shareholders approveCorrect answer is option 'B'. Can you explain this answer?.
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