Does share premium form a part of authorized share capital?

Pvt ltd 7608 views 6 replies

We are a Private Ltd Company registered with Rs.1lac of authorised & paid-up capital. We are in the process of sourcing funding for our company. Wanted to know:

a) Does the share premium a/c forms a part of authorised captial. Thus if we want to raise 60lacs by issuing shares, can we have an authorised captial of 10lacs & collect the balance through share premium a/c without raising the authorised share capital to 60lacs? Here we are assuming shares are issued at a premium.

b) Can this amount received as share premium be utilized for growth and expansion of the company? Is section 78, which restricts use of share premimum monies for 5 purposes, applicable for pvt ltd company?

 

Replies (6)

share premium doesnot include in the part of authorised capital.

n share premium amount is restricted to the private company also

Share  premium is shown under " Reserves and Surplus" in the b/s. it is not the part of authorised capital and section 78 is applicable on every company.

Section 78 is applicable to both a public and private company. Hence it can be used only for specified purposes.

 

Share premium amount is not a part of authorised capital. As soon as you received the Share premium amount you have to transfer it to the security premium account.

Share Premium Account is not a part of Authorised Share Capital instead it is a part of "Reserves and Surplus".

Section 78 of the Companies Act, is equally applicable to Public Limited Company and to Private Limited Company. For more detailed explanation kindly refer the below mentioned link: -

 

/experts/sec-78-of-companies-act-466045.asp

 

Originally posted by : CA Kiran Sutrave

Share Premium Account is not a part of Authorised Share Capital instead it is a part of "Reserves and Surplus".

Section 78 of the Companies Act, is equally applicable to Public Limited Company and to Private Limited Company. For more detailed explanation kindly refer the below mentioned link: -

 

/experts/sec-78-of-companies-act-466045.asp

 

It is correct.

It is not part of authorised capital.


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