Q.At what minimum price per share company can issue shares according to current provisions of Companies Act?
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Share Issuance Conditions – A First Look
Think of a company that wants to raise money by selling pieces of itself — those pieces are called shares. But the company can't just collect cash and hand over shares any way it likes. There are rules about when and how the money must come in. These rules are the share issuance conditions.
Everyday Intuition
Imagine you're buying a ₹100 cricket bat from a shop. You could:
- Pay the full ₹100 upfront and take the bat home.
- Pay ₹30 now, ₹30 next week, and ₹40 when the bat arrives.
A company issuing shares works similarly. The total price of one share (called face value or nominal value, say ₹10) can be collected in instalments — but only if the company's board of directors decides so, and only if the company's memorandum and articles allow it. The law (Companies Act, 2013) sets the conditions for these instalments.
Precise Meaning
Share issuance conditions refer to the terms on which a company invites the public to subscribe to its shares. These conditions specify:
- The total amount per share (face value + any premium).
- The number and timing of instalments (called calls) — e.g., application, allotment, first call, final call.
- The minimum amount that must be collected at each stage.
The minimum subscription condition: A company cannot allot shares unless it has received applications for at least 90% of the issued amount. If not, the entire application money must be refunded within 30 days.
Why It Matters
These conditions protect both the company and the investor:
- For the company: Ensures it gets the promised funds in a planned manner, avoiding cash flow problems.
- For the investor: Prevents the company from demanding too much too soon. The investor knows exactly when and how much to pay.
- For accounting: Determines when to record money as share capital (liability) and when to record it as calls-in-arrears (if unpaid).
Accounting Treatment
When shares are issued, the company receives money in stages. Each stage has a specific journal entry.
Key accounts involved:
- Bank A/c – Debited when money is received.
- Share Application A/c – Credited when application money is received.
- Share Allotment A/c – Credited when allotment money is due.
- Share Capital A/c – Credited for the face value of shares.
- Securities Premium Reserve A/c – Credited for any amount above face value (premium).
- Calls-in-Arrears A/c – Debited if a shareholder fails to pay a call.
Step-by-step entries (assuming ₹10 face value, ₹2 premium, issued at ₹12 per share in two instalments: application ₹5, allotment ₹7):
1. On receipt of application money:
Bank A/c Dr. ₹5,00,000
To Share Application A/c ₹5,00,000
(Being application money received on 1,00,000 shares @ ₹5 each)
2. On transfer of application money to share capital (after allotment):
Share Application A/c Dr. ₹5,00,000
To Share Capital A/c ₹5,00,000
(Being application money transferred to share capital)
3. On allotment money becoming due:
Share Allotment A/c Dr. ₹7,00,000
To Share Capital A/c ₹5,00,000
To Securities Premium Reserve A/c ₹2,00,000
(Being allotment money due on 1,00,000 shares @ ₹7 each, including ₹2 premium)
4. On receipt of allotment money:
Bank A/c Dr. ₹7,00,000
To Share Allotment A/c ₹7,00,000
(Being allotment money received)
If a shareholder fails to pay a call, the unpaid amount is transferred to Calls-in-Arrears A/c (a personal account representing the amount due from the shareholder). It is shown as a deduction from share capital in the Balance Sheet.
Format in the Balance Sheet (as per NCERT) …
Under the present Companies Act a company is not allowed to issue its shares at a discount, so the lowest price at which ordinary shares can be issued is their face (nominal) value. …
A company can issue shares at a minimum of their face (nominal) value; issue at a discount is prohibited under the Companies Act, 2013.
Under the current provisions of the Companies Act, 2013 (Section 53), a company cannot issue its shares at a discount, i.e. below their face value. Any such issue is void. Therefore the minimum price at which shares can be issued is the face (nominal/par) value of the share — a company may issue shares at par or at a premium, but not below par. The only exception permitted by law is the issue o …
Showing the 12 most recent of 30 on this concept.
- CBSE 2026Set MARCH1 markMCQQ.For public issue of shares company has to take a permission from whom?(a) Central Government(b) SEBI(c) State Government(d) Reserve Bank
›Reveal solutionSolution
Permission for a public issue of shares is taken from SEBI, so the answer is (b).
When a company invites the general public to subscribe to its shares, it must comply with the disclosure and investor-protection norms laid down by the Securities and Exchange Board of India (SEBI), the statutory regulator of the securities ma …
- CBSE 2026Set ANNUAL1 markMCQQ.A notice of _______ days must be given to the shareholders for payment of calls on shares.(a) 14(b) 25(c) 51(d) 90(a) 14(b) 25(c) 51(d) 90
›Reveal solutionSolution
A notice of 14 days must be given to shareholders for payment of calls on shares (Option A).
A 'call' is a demand made by the Board of Directors on shareholders to pay the uncalled part of the share price (allotment money, first call, final call, etc.). Under the Companies Act's model Table F articles, which most companies adopt in their Articles of Association, the Board is required to give shareholders at least 14 days' notice spe …
- CBSE 2026Set ANNUAL1 markQ.What is Employee Stock Option Plan?
›Reveal solutionSolution
ESOP gives eligible employees the right to buy company shares later at today's fixed (often discounted) price, aligning their interests with the company's long-term growth.
An Employee Stock Option Plan (ESOP) is an employee benefit scheme that allows a company's employees, officers, or directors to purchase or subscribe to the shares of the company at a future date, at a price that is fixed/predetermined in advance (usually lower than the prevailing market price at the time the option is actually exercised).
Key features:
- The employee is given an "option," not an obligation — they may choose to exercise it or let it lapse.
- There is typically a "vesting period" — a minimum waiting time the employee must serve before being allowed to exercise the option.
- The exercise price is fixed at the time the option is granted, so if the company's share price rises by the time the option vests, the employee benefits from buying shares cheaper than the market price. …
- CBSE 2025Set MARCH1 markMCQQ.As per SEBI guidelines, the minimum amount on each share called by companies must be at least ______ % of the issue price.(a) 25(b) 30(c) 5(d) 20
›Reveal solutionSolution
SEBI guidelines require the minimum amount payable on application to be at least 25% of the issue price. Correct option: (a) 25.
In GSEB Class-12 Commerce Accountancy (Accounting for Share Capital):
…
- CBSE 2025Set ANNUAL1 markMCQQ.Discount on issue of share is (A) Capital gain (B) Capital loss (C) Revenue gain (D) Revenue loss
›Reveal solutionSolution
Discount on issue of shares is a capital loss, so the answer is (B).
When shares are issued at a discount the company receives less than the nominal (par) value of the shares. This shortfall is not a trading/revenue item; it is a loss connected with raising capital, hence a capital loss.
- It is written off against capital profits/securities premium, confirming its capital nature.
- It is certainly not a gain (A) or (C), and not a revenue loss (D), because it does not arise from normal business operations. …
- CBSE 2025Set ANNUAL1 markQ.What is preferential Allotment of shares?
›Reveal solutionSolution
Preferential Allotment means shares (or other securities) are allotted to a pre-selected group of investors at a price decided as per SEBI/Companies Act pricing guidelines, rather than being offered to the general public.
A company can raise share capital in several ways — public issue, rights issue, bonus issue, employee stock option, or Preferential Allotment. In a Preferential Allotment:
- Shares/convertible securities are issued to a specific, identified set of persons — such as promoters, venture capitalists, financial institutions or strategic partners — and not to the public at large.
- It does not require the same wide public subscription process as an IPO/FPO.
- The issue price is determined as per the pricing formula/guidelines prescribed by SEBI (for listed companies) and provisions of the Companies Act, 2013 (special resolution of shareholders required, among other conditions). …
- CBSE 2025Set ANNUAL1 markQ.Give one point of difference between Over-subscription and Under-subscription of shares.
›Reveal solutionSolution
Over-subscription = more applicants than shares on offer; Under-subscription = fewer applicants than shares on offer — each requires a different allotment treatment.
Over-subscription: when the number of shares applied for exceeds the number of shares offered by the company, the issue is said to be over-subscribed. The company cannot allot more shares than it has offered, so it must either reject some applications altogether, make a pro-rata allotment (allotting a proportionately smaller number of shares to each applicant), or use a combination of both; excess application money is either refunded or adjusted towards allotment/calls.
…
- CBSE 2024Set MARCH1 markMCQQ.In India SEBI was established in which year?(a) 1992(b) 1932(c) 1956(d) 1991
›Reveal solutionSolution
SEBI was established (statutory) in 1992, so option (a) is correct.
In this GSEB Class-12 Commerce share-capital topic, SEBI (Securities and Exchange Board of India) is the regulator that controls and monitors the securities market, including the public issue of shares. Though set up administratively in 1988, it was given statutory po …
- CBSE 2024Set ANNUAL1 markMCQQ.P. Ltd. purchased assets of ₹ 7,50,000 from H. Ltd. by issuing shares of ₹ 100 each at a premium of ₹ 25 per share. The number of shares to be issued by P. Ltd. to settle the purchase consideration will be(a) 6,000 shares.(b) 7,500 shares.(c) 9,375 shares.(d) 10,000 shares.
›Reveal solutionSolution
P Ltd. must issue 6,000 shares to settle the ₹7,50,000 consideration — option (a).
When shares are issued at a premium to settle a purchase consideration, each share absorbs (face value + premium) of the consideration.
Item Amount (₹) Purchase consideration 7,50,000 - CBSE 2024Set ANNUAL1 markMCQQ.If fully paid shares of ₹ 10,00,000 are issued for purchase of business having net assets of ₹ 12,00,000, the balance of ₹ 2,00,000 will be transferred to(a) Goodwill A/c.(b) Vendor's A/c.(c) Capital Reserve A/c.(d) General Reserve A/c.
›Reveal solutionSolution
The ₹2,00,000 excess is transferred to Capital Reserve A/c — option (c).
When a business is purchased, the purchase consideration (here fully paid shares of ₹10,00,000) is compared with the net assets taken over (₹12,00,000):
Item Amount (₹) Net assets taken over 12,00,000 Less: Purchase consideration (shares issued) 10,00,000 Capital profit → Capital Reserve 2,00,000 … - CBSE 2024Set ANNUAL1 markMCQQ.Time gap between two calls will be(a) 60 days.(b) 30 days.(c) 90 days.(d) 120 days.
›Reveal solutionSolution
The minimum time gap between two calls is 30 days (one month) — option (b).
Table F of the Companies Act, 2013 (the model articles of association) provides that a period of at least one month must elapse between the dates fixed for the payment of two successive calls, and that each call should no …
- CBSE 2024Set ANNUAL1 markQ.Fill in the blank: A company can issue ________ equity shares at discount. (General/Sweat)
›Reveal solutionSolution
Only sweat equity shares may be issued at a discount; general equity shares cannot. The blank is 'Sweat'.
Section 53 of the Companies Act, 2013 prohibits the issue of shares at a discount, with the sole exception of sweat equity shares issued under Section 54. Sweat equity shares are issued to directors or employees at a discount, or for consideration other than ca …
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