What is the difference between issue of shares at premium and at discount?

A limited company may issue the shares on following different terms. … Issue of Shares at par i.e. at face value or at nominal value. Issue of Shares at Premium i.e. at more than face value. Issue of Shares at Discount i.e. at less than the face value.

Can shares be issued at a premium and at a discount?

A company can issue its shares either at par, at a premium or even at a discount. … Shares sold at a premium cost more than their nominal value, and the amount in excess of the face value is the premium. And of course, shares sold at discount cost less than the face/nominal value.

What does it mean to issue shares at a premium?

A company issues its shares at a premium when the price at which it sells the shares is higher than their par value. This is quite common, since the par value is typically set at a minimal value, such as $0.01 per share. The amount of the premium is the difference between the par value and the selling price.

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What is issue of shares at discount?

The issue of shares at a discount means the issue of the shares at a price less than the face value of the share. For example, if a company issues share of Rs. 100 at Rs. 90, then Rs. 10 (i.e. Rs 100—90) is the amount of discount.

What are the advantages of premium received on issue of shares?

Strong capital base, higher book value of shares – low capital and higher reserves, higher earnings and dividend per shares etc. are financial strength of company. It helps in raising funds by way of capital and borrowing both in future.

Which shares can be sold at discount?

When Shares are issued at a price lower than their face value, they are said to have been issued at a discount. For example, if a share of Rs 100 is issued at Rs 95, then Rs 5 (i.e. Rs 100—95) is the amount of discount. It is a loss to the company.

Why is issuing shares at discount illegal?

Discounted prices may be offered when company is not able to pay its debts and offering it share to its creditors. Company Act 2013 strictly prohibited the companies to issue shares at discounted price. It invites penalty and imprisonment for directors. … So never think of discounted price.

What is the maximum premium that a company can issue at a premium to its share price?

The share is said to have been issued at a 10% premium. The premium will not make a part of the Share Capital account but will be reflected in a special account known as the Securities Premium Account. Now, this amount of premium can be called up by the company at any given time, i.e. with any call.

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What is the maximum limit of premium on shares?

When a share is issued at more than its nominal value it is called issue of shares at premium. There is no limit on the amount of premium.

Can a new company issue shares at premium?

All types of companies can issue their shares at premium. As per the provisions of Section 52 of the Companies Act, 2013 a company can issue shares at a premium, whether for cash or otherwise.

Who can issue bonus shares?

1) Bonus shares can be issued by a company only if the Articles of Association of the company authorizes a bonus issue. Where there is no provision in this regard in the articles, they must be amended by passing special resolution act at the general meeting of the company.

Which shares Cannot be issued at discount?

A company cannot issue shares at a discount because the loss due to the discounted price is barely managed by any company.

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