Explain five circumstances when shares may be issued at a discount
ANSWER
Issue of shares at a discount
• The shares must belong to a class already issued the company.
• One year must have elapsed from the date the company was entitled to commence business.
• It must be authorised a resolution of members in general meeting
• The resolution must fix the maximum rate of discount at which the shares are to be issued.
• The issue must be approved the court.
• The issue must be made within one month from the date of approval the court or such extended time as the court may permit.
• The issue must be disclosed in the prospectus of the company.
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Happy co. Ltd was incorporated in January 2000 with an authorized share capital of 50,000,000 of one shilling per share which is fully issued and fully paid. The original articles of association gave the directors authority to issue the initial authorized share capital. The directors are proposing to purchase a plot from Mr Karan for KShs.3,000,000 and to finance the purchase a fresh issue of 2,000,000 shares at one shilling per share to Mr. Karan. In order to develop the plot they propose to raise further capital issuing a further 2,000,000 shares of one shilling each. The directors propose that 1,000,000 of the shares should be offered to existing shareholders and 1,000,000 to the general public. The shares to Mr Karan, the existing shareholders and to the general public are to be offered at one shilling and fifty cents each. Explain the preliminary checks which the directors must make before proceeding with these proposals. State the steps the directors must take to give them effect.
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