Q&As

What is a share premium account and how may sums in it be used?

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Published by a ÀÏ˾»úÎçÒ¹¸£Àû Corporate expert
Published on: 30 November 2016
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The Companies Act 2006 (CA 2006) provides that each share in a limited company must have a fixed nominal value, eg, £1.

There are no statutory or other restrictions on the issue of shares at a 'premium' (that is, at more than their nominal value).

Where a company issues shares at a premium (whether for cash or otherwise), a sum equal to the aggregate amount or value of the premiums on those shares must be transferred to an account called the 'share premium account'. Shares issued for a consideration other than cash are issued at a premium if the value of the assets in consideration of which they are issued is more than the nominal value of the shares (Henry Head & Co Ltd v Ropner Holdings Ltd and Shearer (Inspector of Taxes) v Bercain Ltd.).

The requirement that a company to transfer sums to its share premium account is subject to the CA 2006 provisions dealing with group construction relief (CA 2006, s 611)

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Share premium definition
What does Share premium mean?

The amount paid for newly issued shares above their nominal value.

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