When an asset is acquired by a company, the payment of asset price can be made by the issue of shares or in cash to the vendor. Moreover, when shares are given against the purchase price, it is known as ‘Issue of shares for consideration other than cash’. In this case, shares are not open to the general public.
A company can issue shares for consideration other than cash. Common examples include issuing shares in return for property, assets the company needs or (e.g. in a takeover) shares in another company.
It may offer the fully paid equity shares to the vendor for the value of the assets. It can also issue shares to the promoters or the lawyers for rendering services in the formation of the company. It needs to show the ‘shares issued for consideration other than cash’ separately under the heading ‘Share Capital’.
What do you mean by issue of debenture for consideration other than cash?
If a company purchases assets from its suppliers or vendors, then instead of paying them in cash the company issues debentures to them. This is known as issue of debenture for consideration other than cash.
Issue of Shares is the process in which companies allot new shares to shareholders. Shareholders can be either individuals or corporates. The company follows the rules prescribed by Companies Act 2013 while issuing the shares. … The process of creating new shares is known as Allocation or allotment.
The issue can be done only after at least one year of commencement of business and should be authorised by a Special Resolution specifying the number of shares, the current market price, consideration if any, and the class or classes of directors or employees to whom such equity shares are to be issued.
When a private UK company issues shares for non-cash consideration, there is no statutory requirement for the directors to obtain a formal valuation. … A private company can issue shares nil or partly paid, and then call for the balance of the issue price to be paid at a later date.
When the company asks the total par value of at the time of application; it is called the issue of shares on a lump sum basis. E.g., if a share of Rs. 20 is issued at Rs. 20 and the whole amount is collected with the application, it is called the issue of share at par on a lump sum basis.
According to section 62(1)(c) of the Act, a company can issue shares to any persons, if it is authorised by a special resolution, either for cash or for consideration other than cash, if the price of such shares is determined by the valuation report and any other conditions as may be prescribed.
Can right issue be made for consideration other than cash?
A company can also issue the right shares to any other person by passing a Special Resolution either for cash or for consideration other than cash. However, the registered valuer determines the price of such shares by making a valuation report subject to prescribed conditions.
What is consideration of the debenture?
Consideration of debenture is Interest.
When debentures are issued as consideration of purchase of assets?
It may happen that a company has acquired any other company or purchased some assets from a vendor and then instead of paying by cash, the company has opted to settle the payment by issuing debentures to the vendors. The debentures can be issued in three ways: at par, at discount and at premium.
What does it mean to issue a debenture?
Debentures are a type of Debt Instrument, similar to a Bond, that companies issue in order to raise capital. … Companies pay investors interest for the term of the Debenture. At the end of the lending period, issuing companies usually offer the choice of converting the Debentures into Shares.
How to Issue Stock: Method 2– Issuing Stock
- Calculate the amount of capital that is needed.
- Review the number of authorized shares that are available.
- Calculate the total value of the shares that will be issued.
- Determine if preferred or common shares should be issued.
- Calculate the total number of shares to issue.
Further Issue of shares with Rules: An Detailed Analysis
♦ Purpose: An existing company can expand its business operations and raise funds through the issue of right or bonus shares to existing shareholders in proportion to the shares held by them, private placement and preferential allotment.
Generally, the issue of shares is of two kinds – common shares and preference shares. While the former allows for voting rights to the shareholders, the latter does not permit the holders of any rights. However, the dividend is passed on to both in case of a profit.