Question

Which of the following statements is correct regarding the issue of Shares and Debentures at a discount?

• A. Shares may be issued at a discount, whereas debentures cannot be issued below their face value.
• B. Debentures may be issued at a discount, but shares cannot ordinarily be issued at a discount under the Companies Act.
• C. Both shares and debentures are prohibited from being issued at a discount.
• D. Both shares and debentures can freely be issued at a discount without any legal restrictions.

Hint:

To remember this:
• Shares = Equity. The law protects the value of ownership; therefore, No Discount (except Sweat Equity).
• Debentures = Debt. It's just a loan. Like any loan, you can negotiate the "entry price"; therefore, Discount Allowed.

Answer 1

The Correct Option is B