A limited company may issue the shares on following different terms. … Issue of Shares at par i.e. at face value or at nominal value. Issue of Shares at Premium i.e. at more than face value. Issue of Shares at Discount i.e. at less than the face value.
Can shares be issued at a premium and at a discount?
A company can issue its shares either at par, at a premium or even at a discount. … Shares sold at a premium cost more than their nominal value, and the amount in excess of the face value is the premium. And of course, shares sold at discount cost less than the face/nominal value.
What is issue of shares at par premium and discount?
When shares are issued at a price equal to their face value it is termed as shares issued at par. When issue price of a share is more than its face value, it is known as shares issued at a premium. If issue price of a share is less than its face value, it is called as shares issued at a discount.
What does it mean to issue shares at a premium?
A company issues its shares at a premium when the price at which it sells the shares is higher than their par value. This is quite common, since the par value is typically set at a minimal value, such as $0.01 per share. The amount of the premium is the difference between the par value and the selling price.
What is issue of shares at discount?
The issue of shares at a discount means the issue of the shares at a price less than the face value of the share. For example, if a company issues share of Rs. 100 at Rs. 90, then Rs. 10 (i.e. Rs 100—90) is the amount of discount.
Which shares can be sold at discount?
When Shares are issued at a price lower than their face value, they are said to have been issued at a discount. For example, if a share of Rs 100 is issued at Rs 95, then Rs 5 (i.e. Rs 100—95) is the amount of discount. It is a loss to the company.
Why is issuing shares at discount illegal?
Discounted prices may be offered when company is not able to pay its debts and offering it share to its creditors. Company Act 2013 strictly prohibited the companies to issue shares at discounted price. It invites penalty and imprisonment for directors. … So never think of discounted price.
What is the meaning of par premium and discount?
When a company issues a new bond, if it receives the face value of the security the bond is said to have been issued at par. If the issuer receives less than the face value for the security, it is issued at a discount. If the issuer receives more than the face value for the security, it is issued at a premium.
What is par premium and discount?
When a bond is sold for more than the par value, it sells at a premium. A premium occurs if the bond is sold at, for example, $1,100 instead of its par value of $1,000. Conversely to a discount, a premium occurs when the bond has a higher interest rate than the market interest rate (or a better company history).
What are the purpose for which shares premium amount can be utilized?
A share premium account can be used to write off certain expenses, such as the cost of underwriting, commissions paid, and certain discounts. The accounts can also be used to issue bonus shares.
What is the maximum premium that a company can issue at a premium to its share price?
The share is said to have been issued at a 10% premium. The premium will not make a part of the Share Capital account but will be reflected in a special account known as the Securities Premium Account. Now, this amount of premium can be called up by the company at any given time, i.e. with any call.
Can a new company issue shares at premium?
All types of companies can issue their shares at premium. As per the provisions of Section 52 of the Companies Act, 2013 a company can issue shares at a premium, whether for cash or otherwise.