Question

Assertion (A): Forfeited shares cannot be reissued by the company at a discount.

Reason (R): It being sale of shares and not an issue of shares, the company can reissue them at any price.

In the context of above two statements, which of the below options is correct?

Options

• Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).

• Assertion (A) is false but Reason (R) is true.

• Both Assertion (A) and Reason (R) are false.

Answer 1

Both Assertion (A) and Reason (R) are false.

Explanation:

• Assertion (A) is false: Companies are legally permitted to reissue forfeited shares at a discount. The only restriction is that the discount allowed cannot exceed the amount already collected and forfeited on those specific shares.
• Reason (R) is false: A company cannot reissue forfeited shares at just "any price." A minimum price restriction applies, ensuring that the new reissue price plus the originally forfeited amount equals at least the paid-up value of the shares.