Issue of Shares at Premium under Companies Act 2013

Issue-Shares-at-Premium-Companies-Act-2013

Issue of Shares at Premium under Companies Act 2013


The word ‘premium’ implies something more than normal. With reference to shares and securities issued by a company, premium means a sum over and above the face or par value of a security. It is the amount which is excess of the issue price of a share over its face value (or par value) and is referred to as ‘share premium’. When shares are issued by a company at a price above their face value (or nominal or par value) then the shares are said to have been issued at a ‘premium’. It is the difference between the price at which a company issues a share and the face value of a share.

Section 52 of the Companies Act, 2013 deals with the application of premium received on issue of shares. In accordance with sub-section (1) of section 52, where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premium on those shares shall be transferred to an account, to be called, “the share premium account” and the provisions of this Act relating to reduction of share capital of a company shall, except as provided in this section, apply as if the securities premium account were the paid-up share capital of the company. The securities premium account may be applied by the company—
1.         towards the issue of unissued shares of the company to the members of the company as fully paid bonus shares;

2.            in writing off the preliminary expenses of the company;

3.       in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company;

4.   in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company; or

5.            for the purchase of its own shares or other securities under section 68.

Sub section 3 of section 52 provides that the securities premium account may, be applied by such class of companies, as may be prescribed and whose financial statement comply with the accounting standards prescribed for such class of companies under section 133,—

1.        in paying up unissued equity shares of the company to be issued to members of the company as fully paid bonus shares; or

2.        in writing off the expenses of or the commission paid or discount allowed on any issue of equity shares of the company; or

3.            for the purchase of its own shares or other securities under section 68.


If the company is a listed company then the company is required to comply with the provisions of SEBI (ICDR) Regulations, 2009.
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