Accountancy · Ch 5 — Accounting for Share Capital
Issue of Shares at a Discount
5.6.6
Issue of Shares at a Discount
When a company issues shares at a price lower than their face value (also called nominal or par value), it is called an issue of shares at a discount. The difference between the face value and the issue price is the discount on the issue of shares.
For example, if a share with a face value of ₹100 is issued for ₹98, the discount is ₹2 per share, which is 2% of the face value.
Watch out
As a general rule, a company cannot ordinarily issue shares at a discount. The Companies Act strictly prohibits this except in two specific cases:
- Reissue of forfeited shares (covered later in the chapter)
- Issue of sweat equity shares (shares issued to employees or directors as a reward for their contribution) …