Maximum face value of a share

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Querist : Anonymous

Querist : Anonymous (Querist)

24 December 2012 Hi,

Please update me the relevant section in which max. face value of a share is defined.

Ajay Mishra

Ajay Mishra (Expert)
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24 December 2012 Hi

On February 2, Sebi had announced that companies would now have to declare dividend on per share basis and not on the face value. However, the proposal to do away with the concept of face value took a backseat because of legal complications.

Abolition of the multiple face value concept would lead to the merger of the capital of a company with its share premium account and the declaration of dividend per share would then provide a much clearer picture of corporate performance.

For instance, Sebi would have to think of either imposing a uniform face value structure or abolish the concept as the old provisions relating to face value mentioned in Section 13(4) of the Companies Act, 1956 have still been retained in the Companies Bill 2008.

However, the debate on uniform face value of shares has been going on for over eight years now. The debate gained momentum in June 1999 when Sebi amended the guidelines relating to denomination of equity shares and allowed companies to choose the par value or face value of their stocks.

Until Sebi's amendment of the rules in June 1999, a 1983 guideline had required companies to issues shares with a face value of either Rs 10 or Rs 100. Even then, it had already been decided that the face value would be standardised at Rs 10 and many companies had begun the process of splitting their Rs 100 shares in the hope of improving liquidity and allowing easy comparison of prices across similar businesses.

Sebi had earlier allowed companies to reduce the face value to Re 1, or multiples of Re 1, so long as the shares were dematerialised.

The decision saw the shares of many information technology and entertainment companies zooming after they reduced the face value from Rs 10 each to Rs 5.

It is suggestive in nature.

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Querist : Anonymous

Querist : Anonymous (Querist)

24 December 2012 Thank You
Sir,
But i want to ask further that what would be the maximum face value of a share in a company?

Ajay Mishra

Ajay Mishra (Expert)
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24 December 2012 Hi

It will decide management that what will be the face value of shares,it can be Rs. 1, 5,, 10 or Rs. 100 or any price which the management decide.

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