premium shares allotment
A private limited company incorporated in the year 2016. financials not prepared. Is valuation report required to issue shares on premium?
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The total paid-up share capital is equal to the issue price of common share multiplied by the number of common shares.
The issue price may include two components:
The par value is the price per common share stated in the memorandum of association.
Generally the par value of a common share is in the denomination of Rs. 100 or Rs. 10. Any amount in excess of the par value is called the share premium.
In the case of new companies the par value and the issue price may be the same. The existing highly profitable companies may issue common shares at a premium. The paid-up share capital is stated at the par value. The excess amount is separately shown as the share premium. The company’s earnings, which have not been distributed to shareholders and have been retained in the business, are called reserves and surplus.
They belong to the common shareholders. Thus the total common shareholders equity is the sum of paid up share capital, share premium and reserves and surplus. The total shareholders equity is also called networth.