Issuing company shares at a premium

Issuing company shares at a premium

April 01, 2019

When shares are issued at a price higher than the face value (also called par value or nominal value), it is called an issue of shares at a premium.

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 the CAMA relating to the reduction of the share capital of a company shall apply as if the share premium account were paid‐up share capital of the company.

The share premium account may be applied by the company in paying up unissued shares of the company to be issued to members of the company as fully‐paid bonus shares, in writing off‐

(a) the preliminary expenses of the company or

(b) the expenses of, or the commission paid or discount allowed on, any issue of shares of the company or in providing for the premium payable on redemption of any redeemable share of the company.

Reference- S. 120 CAMA

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