Issue of shares at a premium

Pvt ltd 660 views 4 replies

prabhaaas

Company Secretary and Cost Accountant

116 Points Joined May 2008

A private limited company wants to issue further shares to the promoters at a premium of rs.30 /- per share for a face value of 10. The promoter wants to subscribe to 5 lacs shares of rs, 10 each at a premium of 30 per share totalling to 2.00 crores. The details are as follows

1. Authorised capital 3.00 crores

2. Paid up capital 2.25 crores

3. Further issue : 50 lacs at a premium of 150 lacs

Now since the increase is within the authorised capital limits, filing of form PAS 3 is sufficient. Kindly let me know that since this subscripttion is at premium, is there any restriction that subsequent issues should also be at premium.

Replies (4)

P C Agrawal

Registered independent director Past Ch

8229 Points Joined March 2007

The issue should not be at a price lower than book value of shares. However, while issuing shares at a premium you have to keep in mind provisions of Sec.56 of IT Act which may levy tax on excess premium treating the same as other income.

Arif Ali

Apt Co Advisory

1230 Points Joined June 2009

howwever there is not restriction to issue on securities premium under company act. But under income tax law, if any closely held company received the more consideration than instrinsic value of share, then more consideration will be treated as income from other sources under section 56(2)(viib) in the hand of that company.

Suresh Kumar Goyal

CA Practice

54 Points Joined September 2014

Originally posted by : P C Agrawal
	The issue should not be at a price lower than book value of shares. However, while issuing shares at a premium you have to keep in mind provisions of Sec.56 of IT Act which may levy tax on excess premium treating the same as other income.

You have mentioned that issue should not be at a price lower than book value as per as i understand the issue can not be more than book value. Please clarify

Suresh Goyal

prabhaaas

Company Secretary and Cost Accountant

116 Points Joined May 2008

Originally posted by : Suresh Kumar Goyal
	I had actually meant face value and not book value. Originally posted by : P C Agrawal The issue should not be at a price lower than book value of shares. However, while issuing shares at a premium you have to keep in mind provisions of Sec.56 of IT Act which may levy tax on excess premium treating the same as other income. You have mentioned that issue should not be at a price lower than book value as per as i understand the issue can not be more than book value. Please clarify Suresh Goyal