# Issue of Shares at a Premium — Section 52
## Meaning of Share Premium
When a company issues shares at a price higher than their face/nominal value, the excess over the face value is called the share premium (now formally 'Securities Premium').
## Power to Issue at Premium
1. There is no restriction in the Act on issuing shares at a premium.
2. The power to issue at premium need NOT be specifically provided in the Articles of Association.
3. SEBI guidelines must be observed by listed companies (regulations dictate when issue must be at par vs. premium).
## Transfer to Securities Premium Account — Key Principles
| Principle | Description |
|---|---|
| Form of receipt | Premium may be received in cash or in kind |
| Mandatory transfer | Premium received must be credited to a separate Securities Premium Account |
| Sanctity | This account must be maintained with the same sanctity as paid-up share capital |
| Reduction | It can only be reduced in the manner paid-up share capital is reduced under the Act (subject to permitted uses in sub-sections 2 & 3) |
## Disclosure Requirements
1. Shown as a separate item in the Balance Sheet under Schedule III, Part B.
2. If disposed of wholly or partly, disclosure of how it was disposed must be made.
3. DCA opinion: The premium cannot be treated as free reserve — it is in the nature of a capital reserve.
4. Reduction of premium account has been allowed under schemes approved by experts as fair, just and proper.
## Application of Securities Premium [Sub-section 2] — General Companies
The Securities Premium Account may be applied for:
| # | Permitted Use |
|---|---|
| a | Issue of fully paid bonus shares |
| b | Writing off preliminary expenses |
| c | Writing off issue expenses (including commission paid or discount allowed on issue of shares/debentures) |
| d | Premium payable on redemption of preference shares or debentures |
| e | Buy-back of own shares/securities under Section 68 |
## Restricted Application [Sub-section 3] — Prescribed Class of Companies
Sub-section (3) has an overriding effect over sub-section (1) and (2). For a prescribed class of companies whose financial statements comply with accounting standards under Section 133, Securities Premium can be applied ONLY for:
| # | Permitted Use |
|---|---|
| a | Issue of fully paid bonus shares |
| b | Writing off issue expenses (including commission/discount on issue of shares) |
| c | Buy-back under Section 68 |
Note: Writing off preliminary expenses and paying premium on redemption are NOT permitted for these companies.