Conversion of debentures and violation of sec 79

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 March 2012 In case of conversion of debentures (originally issued at discount)into shares the amount realised(net of discount)on issue of debenture is used as basis for determining number of shares to be issued otherwise it amounts to violation of sec 79 of companies act,1956.Please enlighten why is the provision of sec 79 getting violated

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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18 March 2012 Section 79 deals with the issue of shares at discount. The shares can be issued at discount under certain circumstances and only the shares forfeited can be issued at discount or only in case BIFR matter the shares can be issued at discount. As regards issue of debentures it can be issued at discount and has no connection with the provisions of section 79. Conversion of shares has to be done at face value except the circumstances mentioned above.