Can private limited company sell its shares at premium over nominal price?

[Anonymous]

A private limited company has issued shares at the face value of Rs. 10 earlier when the company was incorporated. It was registered about 5 years back. The company is making good profits. Now is it possible under law for the private company to sell its shares at premium over the face value or the nominal value of Rs. 10? For example, can the private company sell its shares at Rs. 60 when its face value is only Rs. 10?

[Dr. Ashok Dhamija]

There is no restriction imposed in the Companies Act, 2013, on a private limited company to sell its shares at a premium over the face value or the nominal value of the shares. While Section 53 (read with Section 54) puts some restrictions on sale of shares of a company at discount, there is no restriction on the sale of shares at premium.

Please note that wherever shares are issued at a premium by a company, Section 52 of the Companies Act would apply for dealing with the aggregate amount of premium received.

     

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Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers. List of his YouTube Videos.

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