Terms of Issue of Shares

Terms of Issue of Shares
A company may issue shares:
1. At Par, ( at the nominal or face value) or
2. At Premium (above the nominal or face value)
1. Issue of Shares at Par
Issue of shares at par means that issue issue price of share is same as nominal or face value of the share .
Q . What is meant by issue of shares at par? All India 2010 (APYQs)
Ans. When shares are issued at the face value, the shares are said to have been issued at par.
2. Issue of Shares at Premium
Issue of share at premium means share is issued at the value that is more then the face value .
For example -: A share with nominal value of  ₹ 100 issued for ₹ 120 .
*(The Additional amount received with share as premium is called Premium with share and transferred to Security premium reserve . )*

Utilisation of Security premium reserve

Issuing fully paid bonus shares to the members;

Writing off preliminary expenses of the company;

Writing off the expenses of, or the commission paid or discount allowed on any issue of

securities or debentures of the company;

Providing for the premium payable on the redemption of any redeemable Preference Shares or of any debentures of the company;

In purchasing its own shares (buy-back).

Q . Give any one purpose for which the amount received as ‘securities premium reserve’ may be utilised. Delhi; All India (C) 2014(Arihant PYQs)
Ans. Securities premium reserve can be utilised in writing-off preliminary expenses of the company.
Q . What is meant by ‘securities premium reserve’? Delhi 2013 (Arihant PYQs)
Ans. A company can issue its shares at more than its face value. Excess of issue price of shares over its face value is termed as securities premium reserve.


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