Fresh share issue in pvt ltd company

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 March 2013 a) Is there any new rule that shares cannot be issued at a premium in a PVT Ltd Co after 31.03.2012? And, that shares can be issued only at book value?

b) If a small Pvt Ltd. Co (in the Consultancy business) wishes to issue shares to a foreign investor, that it is mandatory to issue the shares based on book value or can the shares be issued at par even if book value is much higher?

Ankur Garg

Ankur Garg (Expert)
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14 March 2013 According to me no such new rule has been introduced and a private company can issue shares at premium. However the amount of premium must be justified for ROC purpose.

It is better to go for valuation of the company to arrive at premium price. In case of any question raised by ROC on premium amount, you can show the valuation report given by a reputed CA firm. There should be some justification for issue of shares at premium.

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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14 March 2013 b) Shares has to be valued under 'discounted cash flow method', as per FEMA regulations, and should be issued at that price to the Foreign investor.

CA Ayush Agarwal

CA Ayush Agarwal (Expert)
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16 March 2013 There is No Rule Regarding Issuing to Domestic Investor.
But as Suggested by Warrier Sir, For Foreign Investor, Follow FEMA Regulations.

But For Domestics Also, Book Value Method Must be Adopted for Future Inquiries.

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Querist : Anonymous

Querist : Anonymous (Querist)

17 March 2013 Thank you all for your inputs.

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