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THis is in connection with issue and allotment of shares to a foreign parent co under new Act. FEMA requires shares to be issued at fair value certified by auditors. Also, Section 62 of the new Act requires that issue of shares should be at value determined by the registered valuer. In one case, the value of share is around Rs. 1.2 whereas the face value is Rs. 10. Section 53 of the Act prohibits issue of shares at discount. We are confused. If the issue is in accordance with Section 62, i e at Rs. 1.2, there will be a violation of section 53. Is there any conceptual misunderstanding By Hina Sadrani, Self Employed

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Posted By: Vivek vijay 11 year(s) ago

This question has been closed if you want to answer,you have to re-open.


Expert    Ankit Singhi

please take note that the case you mentioned is a perfect example of contradictory provisions in two statue . FEMA provides for valuation based on DFCF while Companies Act 2013 talks of various other methodologies and the similar will be the case of issues of shares of discount. Keeping in view your example under the provisions of the Companies Act 2013, you cannot issue shares at discount , so you have to issue it either at or above the face value.

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