Share Capital and Types of Shares — SPCC STD 11 Commerce — Question

• Shares Issued at Premium: When the company issues shares at the amount more than the face value or par value then it is said at premium, e.g. shares of face value of Rs 10 when issued for Rs 15 then Rs 5 is termed as the premium charged. Normally the company with good prestige and well developed companies issue share at a premium.
• Share premium is a capital gain for the company. The amount of security premium can be utilized by the company as under:

1. To issue bonus share on fully paid up shares.
2. To write off preliminary expenses of the company.
3. To write off the amount of redeemed premium if debentures are to be redeemed with premium.
4. Expenses made during the issue of shares or debenture by the company, to write off discount or under writing commission or brokerage expenses.
5. The amount of share premium cannot be utilized to declare dividend.