Beta Limited, a listed company, had built its bank borrowings to over ₹ 25 Crore over the past 5 years and there have been multiple defaults in payment of interest and principal amount. The Company has accumulated signif

Section 53 of the Companies Act, 2013 stipulates that a company shall not issue shares a discount, except when an issue of sweat equity shares is made in compliance with section 54 of the Act. Any such issue of shares by a company at a discount shall be void. Section 53(2A) however provides an exception to a company when its debt is converted into shares in pursuance of any statutory resolution plan or debt restructuring scheme in accordance with any guidelines or directions or regulations specified by the Reserve Bank of India under the RBI Act or the Banking (Regulation) Act, 1949. In view of the above, as there is a proposal from Beta Ltd's bankers for a conversion of total debt into equity shares of the company at a discount of 10% on the face value of such shares, the company can issue shares at a discount provided the conversion is in pursuance of a debt restructuring plan in accordance with the guidelines issued by the RBI. Accordingly, the company cannot sustain argument of prohibition under section 53 in view of the provision under section 53(2A) which exempts the above transaction.