Valuation of Share Premium

jidesh (ca) (23 Points)

11 June 2008  

A group of individuals incorporate a company X Private Limited with Rs. 1,00,000  and 10,000 shares of Rs.10/- each, then bring in further capital at a premium of INR 10,000 per share thereby increasing the total share capital to INR 10,00,00,000/- without altering the number of shares? what is the basis of this valuation? Is some ting like this allowed in India, since it is a newly incorporated entity? If not, what is the guideline to be followed. This is going to be a pure private limited company