EASING THE REQUIREMENT OF RAISING CAPITAL IN DISTRESSED COMPANIES

 EASING THE REQUIREMENT OF RAISING CAPITAL IN DISTRESSED COMPANIES

Section :Section 53

Issue to be addressed :

Section 53 of the Act, in the present form does not permit a Company to issue shares at discount. Accordingly, it would be difficult for distressed companies where the market value of the shares becomes less than the nominal value, thereby leading to difficulties in raising fresh share capital for the revival of the company.

 

 Amendments /Proposed Recommended by the Committee

The Committee recommended that distressed companies should be allowed to issue shares at a discount to the Central Government or State Government or to such class or classes of persons as may be prescribed, notwithstanding the prohibition under Section 53 of CA-13. It was stated that for this purpose, distressed companies may be categorised as such class or classes of companies that have cash losses (otherthan those arising out of depreciation or revaluation) for previous three consecutive years or more and fulfil such terms and conditions and issue shares at a discount in such manner as may be prescribed by the Central Government. To ensure further safeguards, the Committee recommended that the registered valuers should continue to value such issuances, failing which such issuances would be void