Which of the following statement is correct?

Q: Which of the following statement is correct ?

Which of the following statement is correct ?

Question

Accepted Answer

The correct option is 4:
Sweat equity shares are those which are issued by a company to its directors or employees at a discount or for consideration other than cash, such as for providing know-how, intellectual property rights, or value additions. This is the statutory definition provided under Section 2(88) of the Companies Act, 2013. The statement is correct as it identifies the eligible recipients (employees and directors) and the method of issue (at a discount) as one of the permissible ways for a company to issue sweat equity. The fundamental concept behind sweat equity is to reward and incentivize key personnel for their intangible, value-adding contributions to the company, thereby aligning their ownership stake with the long-term growth and success of the business.

The incorrect option is 1:
The statement "As per Table F rate of interest on calls in arrear is 12%" is incorrect. Table F of Schedule I of the Companies Act, 2013, which applies if a company's Articles of Association are silent, specifies that the maximum rate of interest a company can charge on *Calls in Arrears* is **10% per annum**. The purpose of charging this interest is to penalize shareholders for the delayed payment of call money due on their shares. Therefore, stating the rate as 12% is a misstatement of the prescribed statutory limit for calls in arrear.

The incorrect option is 2:
The statement "As per Table F rate of interest on calls in advance is 10%" is incorrect because it confuses the rates for advance and arrears, and the rate itself is wrong. According to Table F, the maximum rate of interest that a company must **pay** to the shareholder on *Calls in Advance* is **12% per annum**. This interest is compensation to the shareholder for providing funds to the company before the call money was legally due. The rate of 10% actually applies to calls in arrears, making the statement factually inaccurate for calls in advance.

The incorrect option is 3:
The statement "Loss on reissue should exceed the forfeited amount" is incorrect as it violates the core rule for the re-issue of forfeited shares. When a company re-issues forfeited shares at a discount (creating a loss), the maximum discount allowed is legally restricted. The discount/loss on re-issue **cannot exceed** the amount that was originally forfeited on those shares. The intention is to ensure the company never suffers a net capital loss on the share, as the loss is covered by the prior gain (forfeited amount).