Shares of private limited company

This query is : Resolved

Pankaj Jhawar (Querist)
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14 May 2010 If a private limited company issues shares at a premium of Rs. 2000 but the book value and break up value of the shares is Rs. 200 only then what are the consequences in the hands of the issuing company and the acquirer person.

Further what will be the consequences in the hands of the acquirer person when they are sold again.

Rasesh

Rasesh (Expert)
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14 May 2010 There are no specific consequences unless asked by any authority. If asked, valuation has to be justified.

Pankaj Jhawar

Pankaj Jhawar (Querist)
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14 May 2010 Thanks, ut how to justify the same and what impact can be there if no proper justification is there?

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Rasesh

Rasesh (Expert)
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14 May 2010 Justification would be very difficult and the consequence could be that the IT department may consider a notional value for the shares and the balance as deemed dividend. They may also put a scrutiny on the company and charge the comapny and the acquirer for siphoning of funds.