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 1[discount] shall be void.

2[(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[(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.]
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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).

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;

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(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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1. Clause (c) omitted by s. 13, ibid. (w.e.f. 7-5-2018).