Amended and updated notes on section 53 of Companies Act 2013. Detail discussion on provisions and rules related to prohibition on issue of shares at discount.
Chapter IV (Sections 43–72) of the Companies Act, 2013 (CA 2013) deals with the provisions related to share capital and debentures. Section 53 of CA 2013 provides for prohibition on issue of shares at discount.
Recently, we have discussed in detail section 52 (Application of premiums received on issue of shares) of CA 2013. Today, we learn the provisions of section 53 of Companies Act 2013 read with the Companies (Share Capital and Debentures) Rules, 2014.
Section 53 of the Companies Act, 2013 has been notified by the Ministry of Corporate Affairs (MCA) vide Notification No. S.O. 902(E) issued dated 27.03.2014. This notification was come into force from 1st April, 2014 i.e. the commencement date of section 53 is 1-4-2014.
| Name of Act | The Companies Act 2013 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Ministry of Corporate Affairs (MCA) |
| Number of Chapters | 29 |
| Number of Sections | 484 (470-43+57) |
| Number of Schedules | 7 |
| You are reading: | |
| Chapter No. | IV |
| Chapter Name | Share Capital and Debentures |
| Section No. | 53 |
| Section Name | Prohibition on issue of shares at discount |
| Monthly Updated Edition | Company Law PDF |
Section 53 of Companies Act 2013: Prohibition on issue of shares at discount
Section 53 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.
(1) Except as provided in section 54, a company shall not issue shares at a discount.
(2) Any share issued by a company at a discount shall be void.
(2A) Notwithstanding anything contained in sub-sections (1) and (2), a company may issue shares at a discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan or debt restructuring scheme in accordance with any guidelines or directions or regulations specified by the Reserve Bank of India under the Reserve Bank of India Act, 1934 or the Banking (Regulation) Act, 1949.
(3) Where any company fails to comply with the provisions of this section, such company and every officer who is in default shall be liable to a penalty which may extend to an amount equal to the amount raised through the issue of shares at a discount or five lakh rupees, whichever is less, and the company shall also be liable to refund all monies received with interest at the rate of twelve per cent. per annum from the date of issue of such shares to the persons to whom such shares have been issued.