General Studies · Share Capital and Debentures
Swift Logistics Ltd., an unlisted public company, is facing severe liquidity issues and a mountain of unpaid debt. The management proposes two actions: (i) issue Sweat Equity Shares to its Chief Technology Officer (CTO) for intellectual property contribution at a 10% discount to the face value; and (ii) issue new equity shares to its creditors to convert debt into equity under a structured plan, offering the shares at a 5% discount, without any formal restructuring scheme sanctioned by a Court/Tribunal or under guidelines issued by the RBI. Considering the provisions on the issue of shares at a discount under Section 53 of the Companies Act, 2013, which of the proposed actions would be considered void and liable to statutory penalties?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1Action (ii) is permitted as an exception, but Action (i) is void because the discount on Sweat Equity Shares is limited to the issue price, not the face value.
- 2Action (i) is permitted as an exception under Section 54, but Action (ii) is void because the shares are issued at a discount without meeting any statutory exemption under Section 53.✓
- 3Both proposed actions (i) and (ii) are permitted, as the discounts are reasonable and benefit the company financially.
- 4Both proposed actions (i) and (ii) are void, as the issue of shares at a discount is strictly prohibited by Section 53(1).
Correct answer
Action (i) is permitted as an exception under Section 54, but Action (ii) is void because the shares are issued at a discount without meeting any statutory exemption under Section 53.
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