Q.Explain the terms 'issue at par', 'issue at premium' and 'issue at discount'. Can a company lawfully issue shares at a discount?

The three terms simply describe how a share's issue price compares with its face value, but only two of the three are ordinarily lawful.

A company's issue price for a share is described relative to that share's face value, and the terminology falls into exactly three categories. A share is issued at par when the issue price is exactly equal to its face value — a newly incorporated company, without yet having built a market reputation, typically issues its first shares this way. A share is issued at a premium when the issue price exceeds its face value, something an established, well-performing company can usually command from investors willing to pay more than face value for a stake in it; Section 52 of the Companies Act, 2013 requires the excess received as premium to be credited to a separate Securities Premium Account, which, although shown among the company's reserves, can be applied only for a closed statutory list of purposes — issuing fully paid bonus shares, writing off preliminary expenses, writing off the expenses or discount on any issue of shares or debentures, providing for the premium payable on redemption of preference shares or debentures, and buying back the company's own securities under Section 68. …

Some students assume the Securities Premium Account can be freely used like any other reserve for general business expenses — it cannot; Section 52 restricts its use to a specific closed list. Others answer 'no, never' to whether a discount issu …