Section 53: Prohibition on issue of shares at discount
Companies Act, 2013 · Chapter IV: Share Capital And Debentures · In force
This section prohibits companies from issuing shares at a discount, with some exceptions, and sets penalties for non-compliance.
Penalty
(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 of 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.]
The section, clause by clause
What the section says
In plain terms
(1)Except as provided in section 54, a company shall not issue shares at a discount.
A company cannot issue shares at a discount, except in cases allowed under another section.
(2)Any share issued by a company at a 1[discount] shall be void.
If a company issues shares at a discount, those shares are considered 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 (2 of 1934) or the Banking (Regulation) Act, 1949 (10 of 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 of 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.]
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
1. Subs. by Act 1 of 2018, s. 12, for “discounted price” (w.e.f. 9-2-2018).
2. Ins. by s. 12, ibid. (w.e.f. 9-2-2018).
3. Subs. by Act 22 of 2019, s. 9, for sub-section (3) (w.e.f. 2-11-2018).
Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.