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Pvt ltd issue of share at premium

vasoya ankit (Practice) (137 Points)

18 December 2013

Does Pvt Ltd company having negative reserve balance can issue equity share at premium ?

Pl provide government guidelines if any in this regards.

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5 Replies

Syam Kamal (Company Secretary) (66 Points)
Replied 19 December 2013

Yes. In law, the premium of the shares is not in anyway linked to reserves and surplus position of the Company. The Company can charge any amount of premium provided if there are takers to those shares.

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vasoya ankit (Practice) (137 Points)
Replied 19 December 2013

is there any rules / guidelines / case law / section etc in this regards ?

Syam Kamal (Company Secretary) (66 Points)
Replied 21 December 2013

Please refer section 78 of the Companies Act w.r.t utilisation of share premium account. Thre is no rule or guidelines whatsoever regulating issue of shares at premium.

vasoya ankit (Practice) (137 Points)
Replied 21 December 2013

what about applicability of New Company Act 2013 ?

Does it allow to issue share at premium with having negative reserve ?

Syam Kamal (Company Secretary) (66 Points)
Replied 21 December 2013

Yes. No change in the position under Companies Act, 2013 with regard to the issue of shares at premium. Section 52 allows it. The only notable change is that unlike in 1956 act, companies are prohibited from issuing shares at discount except issue of sweat equity shares.