Question
Section 13 of the Banking Regulation Act, 1949 restricts
the commission, brokerage, discount or remuneration that a banking company may pay in respect of any shares issued by it. The aggregate amount so paid shall not exceed what percentage of the price at which the said shares are issued?Solution
Section 13 provides that no banking company shall pay out, directly or indirectly, by way of commission, brokerage, discount or remuneration in any form in respect of any shares issued by it, any amount exceeding in the aggregate two and one-half per cent of the price at which the said shares are issued. The Explanation, inserted by the 2013 amendment, clarifies that “price at which the said shares are issued” includes the amount or value of premium on such shares. This cap operates notwithstanding contrary provisions in the Companies Act and is designed to prevent dissipation of a bank’s capital base through excessive issue-related payments.
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