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Issue of Shares at Premium

A company may issue shares at a premium i.e. at a cost above its par value. The following conditions must be satisfied in relation with the issue of shares at a premium :

The total of premium must be transferred to an account to be called share premium account. The provisions of this Act relating to the decrease of share capital of the company will apply as if the share account premium account were paid up share capital of the company.

Share premium account can be used only for the following purposes :

  • In issuing totally paid bonus shares to members.
  • In Writing off preliminary expenses of the company.
  • In writing off public issue expenses such as underwriting commission, advertisement expenses, etc•
  • In providing for the premium payable paid on redemption of any redeemable preference shares or debentures.
  • In buying back its shares

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