What is Prohibition on issue of shares at discount What is the procedure for Issue of sweat equity shares Section 53 and 54 of Indian Companies Act 2013

Prohibition on issue of shares at discount and Issue of sweat equity shares are defined under Section 53 and 54 of Indian Companies Act 2013. Provisions under these sections are:

 

Section 53 of Indian Companies Act 2013 "Prohibition on issue of shares at discount"

(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 discounted price shall be void.


 

Punishment for violation of Section 53

(3) Where a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.

 

Section 54 of Indian Companies Act 2013 "Issue of sweat equity shares"

(1) Notwithstanding anything contained in section 53, a company may issue sweat equity shares of a class of shares already issued, if the following conditions are fulfilled, namely:-

(a) the issue is authorised by a special resolution passed by the company;

(b) the resolution specifies the number of shares, the current market price, consideration, if any, and the class or classes of directors or employees to whom such equity shares are to be issued;

(c) not less than one year has, at the date of such issue, elapsed since the date on which the company had commenced business; and

(d) where the equity shares of the company are listed on a recognised stock exchange, the sweat equity shares are issued in accordance with the regulations made by the Securities and Exchange Board in this behalf and if they are not so listed, the sweat equity shares are issued in accordance with such rules as may be prescribed.

(2) The rights, limitations, restrictions and provisions as are for the time being applicable to equity shares shall be applicable to the sweat equity shares issued under this section and the holders of such shares shall rank pari passu with other equity shareholders.

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