can a private ltd co issue its shares at premium in its first year of incorporation.provide justification, section no and case law, if possible
Shiva Kumar
(CA Final)
(208 Points)
Replied 26 November 2009
Based on my understanding there is no restriction for a private limited company in Companies Act - Sec 78. Only for listed co, SEBI guidelines say that, shares can be issued only at par in the first year.
But, beware from Income tax point of view. If shares are overly priced, you may face some problem of unexplained credit, i.e., based on what reasons, a higher price was fixed.
Lets see, what others say. This is just my view
Good Luck
Shiva
ARJUNA
(CHARTERED ACCOUNTANT)
(25 Points)
Replied 06 December 2009
Private limited company can issue shares at premium as said by Mr. Shiva Kumar. The question of unexplained credit arises if you are not in a position to substantiate the sources for the investment of particular share holder, who has invested the amount. Premium depends on the good will of the Promoters/Directors of the company or the group to which the company belongs.
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