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Issue of shares at a premium

prabhaaas (Company Secretary and Cost Accountant) (116 Points)

03 December 2014

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.

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4 Replies

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 03 December 2014

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.

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Arif Ali (Apt Co Advisory) (1230 Points)
Replied 03 December 2014

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)
Replied 05 December 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)
Replied 08 December 2014

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