Urgent query regarding issue of shares

[Aarti Jain]

Dear Professional Colleagues,

I wish to know whether a Company can issue shares of the same class with different price to different persons at the same time ? 

For Example if the Company is issuing Class A Shares to Mr. X with a price of Rs. 10/- per share, can it issue the same class of shares to Mr. Y at price of Rs. 50/- per share at the same time. Pls. advise.

Aarti Jain

[SANTOSH K]

it is only possible on rights issue section 81/81(1a) to existing share holder otherwise not possible.

Aarti Jain

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K.SANTOSH

P.M.V SUBBARAO AND ASSOCIATES

COMPANY SECRETARIES  HYDERABAD 

ASHOK NAGAR -500020 INDIA 

HELLO :09030958473 (AP)

[PL Babu]

Private company can do so

[BINDU MADHAVA]

With insertion of Section 56 (2)(viib) of Income Tax Act, 1961, every company needs to issue shares as valuation done by a Chartered Accountant

If you allot the shares at par, when the share value is Rs. 50/-, you may end up with paying tax on Rs. 40/- upon receiving demand notice from AO (tax evasion)

If the share value is Rs. 10/- and allotment with a premium of Rs. 40/-. You need to pay the tax on Rs. 40/-

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[PL Babu]

he Union Budget 2012 has introduced a new clause in the Income Tax Act, 1961, according to which, with effect from April 1, 2013, that portion of consideration received for the issue of shares of a public unlisted company or private company to an Indian resident that is in excess of the fair market value of those shares, will be subject to tax in the hands of the companies under the head “income from other sources”. The aim of this note is to examine the legal effect of amendment made by the Finance Act 2012 to Section 56(2) of the Income Tax Act, 1961 by introduction of clause (viib). It highlights the impact on angel investors in light of the SEBI (Alternative Investment Fund Regulations)2012. The AIF Regulations have further made it difficult for these investors to invest in start ups as stricter requirements have been laid down by SEBI. The paper examines the clause (viib) and discusses its ambit in light of its applicability to closely held companies, residents, receipt of consideration for shares and method of determination of the fair market value. Simultaneous application of Section 68 and Section 56(2)(viib) has also been discussed.

The paper reflects that the amendment introduced by the government with the noble objective of controlling the flow of unaccounted money would not have the desired result on the economy in as much as the start ups and genuine small businesses would be affected. While any legislation aimed at eradicating money laundering and tax evasion is extremely desirable, it is required of the Finance Ministry to ensure that at the same time such legislation does not dissuade entrepreneurial initiatives thereby impeding overall economic growth. Since the notification is yet to be issued by the government granting exemption to a certain class of investors and the SEBI AIF Regulations also mention that certain concessions may be granted to the VC Funds depending on their need, there is still a ray of hope for the angel investors.