Question

Determine the maximum permissible discount and minimum reissue price that a company can allow at the time of reissue of forfeited shares in the following cases:

1. A share of ₹ 10 originally issued at par on which application and allotment money of ₹ 5 was received.
2. A share of ₹ 10 originally issued at a premium of ₹ 1 on which application and allotment money (including premium) of ₹ 5 was received.
3. A share of ₹ 10 originally issued at a premium of ₹ 1 on which application and allotment money (excluding premium) of ₹ 5 was received.

Answer 1

At the time of reissue of forfeited shares:

Maximum Permissible Discount = Amount forfeited on the share

Minimum Reissue Price = Face Value − Maximum Permissible Discount

(i) Share of ₹ 10 issued at par

Application and allotment money received = ₹ 5 per share.

Therefore, amount forfeited:

₹ 5

Maximum Permissible Discount:

₹ 5 per share

Minimum Reissue Price:

₹ 10 − ₹ 5 = ₹ 5 per share

(ii) Share of ₹ 10 issued at a premium of ₹ 1

Application and allotment money received including premium = ₹ 5.

Premium included = ₹ 1.

Therefore, amount received towards Share Capital:

₹ 5 − ₹ 1 = ₹ 4

Maximum Permissible Discount:

₹ 4 per share

Minimum Reissue Price:

₹ 10 − ₹ 4 = ₹ 6 per share​

(iii) Share of ₹ 10 issued at a premium of ₹ 1

Application and allotment money received excluding premium = ₹ 5.

Thus, the entire ₹ 5 represents the amount received towards Share Capital.

Maximum Permissible Discount:

₹ 5 per share

Minimum Reissue Price:

₹ 10 − ₹ 5 = ₹ 5 per share