There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.
Assertion (A): Shares cannot be issued at a discount to the public. They can be issued at par or at a premium.
Reason (R): Shares cannot be issued at a discount unless they are issued as ESOPs (Section 54 of the Companies Act, 2013). They can be issued at par or at a premium.
Answer & explanation
Correct answer: option 2
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 per cent. As a general rule, a company cannot ordinarily issue shares at a discount. It can do so only in cases such as ‘reissue of forfeited shares’ (to be discussed later) and issue of sweat equity shares.