Discount allowed on the reissue of forfeited shares cannot exceed
the amount received on forfeited share
Discount on Reissue of Forfeited Shares Explained
When a company forfeits shares due to non-payment of call money, these shares can later be reissued. The reissue can be done at par, at a premium, or at a discount. However, there is a specific limit on the amount of discount that can be allowed on the reissue of forfeited shares.
The rule regarding the maximum discount allowed on the reissue of forfeited shares is that the discount cannot exceed the amount that was originally received on the forfeited shares. This received amount typically includes the application money, allotment money, and any call money already paid by the shareholder before the shares were forfeited. It specifically excludes any unpaid call money.
Let's look at the options provided:
- Option 1: the amount received on forfeited share - This aligns with the established rule regarding the maximum discount allowed on reissue.
- Option 2: 10% of the paid-up capital - The maximum discount on reissue is not linked to a percentage of the total paid-up capital of the company.
- Option 3: up to 10% of face value - While some issues (like fresh issue at discount) might have limits related to face value, the discount on reissue of forfeited shares is specifically linked to the amount already received on those shares, not a percentage of their face value.
- Option 4: More than one of the above - Since only one of the first three options is correct, this option is incorrect.
- Option 5: None of the above - Since option 1 is correct, this option is incorrect.
Therefore, the maximum discount that a company can allow on the reissue of forfeited shares is limited by the amount that was already received from the shareholder on those specific shares before they were forfeited.
Important Questions from Shares
Rate of return on equity share capital is calculated after deducting _____ and _____ from the net profit before interest.
Which of the following statements are true?
1. A company cannot purchase its own equity shares.
2. A company can issue its shares at a discount by passing a special resolution.
3. The interest rate charged on calls-in-arrear and the interest rate payable on calls-in-advance are the same as per provisions of Table-F of Schedule-I of the Companies Act, 2013.
Identify the correct sequence of activities involved in the process of buy back of shares.
A. Letter of offer to the shareholders.
B. Opening of bank account.
C. Approval for Extra-ordinary General Meeting.
D. Convening board meeting.
E. Declaration of Solvency.
Choose the correct answer from the options given below:
Identify the correct statements in context of equity financing.
A. Borrowing limit increases as a consequence of increase in number of shares.
B. Ordinary shares are generally not redeemable.
C. Issue of new shares dilutes the EPS if the profits do not increase immediately in proportion to increase in number of shares.
D. A company is not legally oblidged to pay dividend.
E. Ordinary shares are less riskier from investor's perspective.
Choose the correct answer from the options given below:
The effect of surrender of shares is the same as of shares':
