There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the codes provided below-
Assertion: A company can issue ordinary shares at a discount to the public during an IPO.
Reasoning: A company can issue shares at a discount only in cases such as reissue of forfeited shares and issue of sweat equity shares.
Answer & explanation
Correct answer: option 4
The correct answer is option 4- Assertion (A) is not true but Reasoning (R) is correct..
Assertion: A company can issue shares at a discount to the public during an IPO. This is false. According to the Companies Act, 2013, a company generally cannot issue shares at a discount to the public during an Initial Public Offering (IPO).
Reasoning: A company can issue shares at a discount only in cases such as reissue of forfeited shares and issue of sweat equity shares. This is true.
There are instances when the shares of a company are issued at a discount, i.e. at an amount less than the nominal or par value of shares, the difference between the nominal value and issue price representing discount on the issue of shares. For example, when a share of the nominal value of Rs. 100 is issued at Rs. 98, it is said to have been issued at a discount of two percent. As a general rule, a company cannot ordinarily issue shares at a discount.
Thus, assertion is false and reasoning is true.