# Issue of Shares at a Premium
## Core Idea
When a company has a strong track record or brand, it can issue shares at a price higher than face value. The excess over face value is the premium, and the law restricts how this premium can be used so it is not treated as ordinary profit.
## 1. What is 'Issue at Premium'?
- Issuing a security at a price higher than its face value = issue at premium.
- Premium = Issue Price − Face Value.
## 2. Securities Premium Account
- The premium received is credited to the Securities Premium Account.
- Premium can be received in cash or kind.
## 3. Treatment as Capital
For the purpose of reduction of capital, the Securities Premium Account is treated at par with paid-up capital. So you cannot reduce it casually — it carries the same protection as share capital.
## 4. Permitted Uses of the Securities Premium Account
The Securities Premium Account can be applied only for the following purposes:
1. Issuing fully paid bonus shares.
2. Writing off preliminary expenses of the company.
3. Writing off expenses, commission, or discount on issue of shares or debentures.
4. Providing for premium payable on redemption of redeemable preference shares or debentures.
5. Buyback of shares or securities under Section 68.
## 5. Restricted Uses for Prescribed Class of Companies
For a prescribed class of companies complying with Accounting Standards (Section 133), the Securities Premium Account may be applied only for:
1. Paying up unissued equity shares to be issued as fully paid bonus shares.
2. Writing off expenses, commission, or discount on equity share issues.
3. Buyback of shares or securities under Section 68.
Note how this list is narrower — preliminary expenses and premium on redemption are excluded for these companies.
## Memory Hook
Uses of Securities Premium = B-P-E-R-B: Bonus, Preliminary expenses, Expense/commission/discount on issue, Redemption premium, Buyback.
For prescribed companies, only B-E-B applies.