Audit of Sweat Equity Shares (Issue at Discount)
According
to Section 53, a company shall not issue shares at a discount, except in the
case of an issue of sweat equity shares given under Section 54, of the
Companies Act, 2013. Sweat Equity share means equity shares issued by the
company to employees or directors at a discount or for consideration other than
cash for providing know-how or making available right in the nature of
intellectual property rights or value additions, by whatever name called. If a
company contravenes the provisions of this section, it shall be punishable with
a fine not less than one lakh rupees but it may extend upto five lakhs.
Moreover, the official in default shall be punishable with imprisonment for a
term which may extend to six months or with fine which shall not be less than
one lakh rupees but which may extend to five lakh rupees, or with both.
The
auditor should see whether the following conditions are fulfilled in case of
Sweat Equity Shares:
1.
The issue should
be authorized by a
special resolution. The
number of shares, current market price, consideration to be received, if
any, and the class of directors, employees to whom the shares will be issued
should be specified in the special resolution.
2. Only
after expiry of at least one year from the date of commencement of company’s
business, these shares can be issued.
3. If
shares of the company are listed on the stock exchange, issue of sweat equity
shares will be in accordance with regulations made by SEBI.
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