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Issue of Shares at Premium Video Lecture | Accountancy Class 12 - Commerce

41 videos|106 docs|56 tests

FAQs on Issue of Shares at Premium Video Lecture - Accountancy Class 12 - Commerce

1. What is the concept of issuing shares at a premium?
Ans. Issuing shares at a premium refers to the practice of selling company shares at a price higher than their face value. This is usually done when the market value of the shares is higher than their nominal value, allowing the company to raise additional capital through the premium charged.
2. Why would a company choose to issue shares at a premium?
Ans. A company may choose to issue shares at a premium to take advantage of favorable market conditions and investor demand. By offering shares at a higher price, the company can raise more capital and potentially enhance its financial position, allowing for future growth opportunities or debt repayment.
3. How is the premium determined when issuing shares?
Ans. The premium for issuing shares is typically determined through a combination of factors, including market conditions, investor demand, the company's financial performance, and the perceived value of the shares. It is usually set by the company's board of directors or through a process involving investment bankers and financial advisors.
4. Are there any legal requirements or restrictions when issuing shares at a premium?
Ans. Yes, there may be legal requirements and restrictions when issuing shares at a premium. Companies need to comply with the laws and regulations of the jurisdiction they operate in, which may include obtaining necessary approvals from regulatory bodies and ensuring proper disclosure to shareholders. Additionally, the premium charged must be justifiable and reasonable, avoiding any unfair practices or misleading investors.
5. How does issuing shares at a premium impact shareholders?
Ans. Issuing shares at a premium can have both positive and negative impacts on shareholders. On one hand, it can potentially increase the value of existing shares, benefiting current shareholders. The additional capital raised through the premium can also be used to fund growth initiatives that may lead to higher returns. However, shareholders' ownership percentage may be diluted if a significant number of new shares are issued, which could affect their voting rights and control over the company.
41 videos|106 docs|56 tests
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