Issue of Securities at a Premium :
Section 52 of the Companies Act, 2013 provides that a company shall transfer the amount received by it as securities premium to securities premium account and state the means in which the amount in the account can be applied.
According to the section where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares shall be transferred to a “securities premium account” and the provisions of this Act relating to reduction of share capital of a company shall apply as if the securities premium account were the paid-up share capital of the company.
Application of securities premium account: The securities premium account may be applied by the company—
(a) towards the issue of unissued shares of the company to the members of the company as fully paid bonus shares;
(b) in writing off the preliminary expenses of the company;
(c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company;
(d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company; or
(e) for the purchase of its own shares or other securities under section 68.
Who may apply the securities premium account: The securities premium account may be applied by such class of companies, as may be prescribed and whose financial statement comply with the accounting standards prescribed for such class of companies under section 133,—
(a) in paying up unissued equity shares of the company to be issued to members of the company as fully paid bonus shares; or
(b) in writing off the expenses of or the commission paid or discount allowed on any issue of equity shares of the company; or
(c) for the purchase of its own shares or other securities under section 68.
There is no provision in the Act, which can prevent a company from issuing securities at a premium, e.g., ` 100 securities at the price of ` 125. However, SEBI Regulation prescribes, classes of companies which can price their issues at par or at premium. This is subject to conditions applicable for promoters contribution and lock-in Period. Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of value of the premium on those securities must be transferred to an account described as “securities premium account”. The word ‘amount’ refers to a cash premium and the word ‘value’ to a premium other than cash. Securities issued for a consideration other than cash will be treated as having been 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 securities. Where a holding company, formed for the purpose of amalgamating two existing companies, acquires assets of a greater value than the nominal value of the shares issued by it in exchange for the existing securities of the amalgamated companies, it is required to transfer the excess value of the assets acquired to its securities premium account [Head Henry & Co. vs. Ropner Holdings Ltd. [1951] 1 All E.R. 944]. Thus, it is clear that a company can issue securities at a premium also for a consideration other than cash.
There is no prohibition in the Act against issue of securities at differential premium. The value which the acquirer of securities may pay in excess of the par value for acquiring the shares, depends upon the contract between the company and the acquirer of such securities [CIT vs. Standard Vacuum Oil Company AIR [1966] SC 1363].