Authorised capital be increased for security premium amt

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ram gurbani (Querist)

11 October 2011 If company issue shares at premium whether Whether authorised share capital of company for security premium amt will be increased.

CS Priyanka Jaiswal

CS Priyanka Jaiswal (Expert)

11 October 2011 No...the share capital will be increased by the nominal amount of per share multiplied by the no. of shares issued irrespective of how much premium is charged on the shares as the premium forms part of Reserve and Surplus and NOT AUTHORISED CAPITAL.....

For ex:
10,000 sh. of nominal value 10/- is issued at a premium of Rs. 40/-....
Your authorised capital will increase by Rs. 1,00,000/- and not by Rs. 5,00,000/-
Your share premium amount will increase by Rs. 4,00,000/-.

i hope it serves your purpose.......

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ram gurbani

ram gurbani (Querist)

12 October 2011 Thank you madam, Generally Private Ltd company are issuing share capital at a premium so as to increase Own Funds so as to maintain Debt Equity Ratio for loan purpose and for saving Stamp duty for increase in Authorised Share Capital.I am consultant in a Bank I am making appraisal of loan cases pls madam suggest me from bank point of view a newly established company is issuing share at Rs. 100 Share Premium Rs.90 Face Value Rs 10 from bank point of view whether it is acceptable.Company is demanding loan amt of Rs. 4 Crore for Standard Debt Equity Ratio 2:1 so Company's Owned Capital should be at least Rs. 1 Crore so as to maintain Standard Debt Equity Ratio. Madam pls guide me whether from bank point of view should we accept issuing shares at premium for newly formed companies.

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