## Issue of Shares at a Premium or Discount — Sections 52 and 53
### The two scenarios
| Position | When it arises |
|---|---|
| Issued at premium | Issue price > face value |
| Issued at discount | Issue price < face value |
### Securities Premium — Section 52
The premium amount is carried to a Securities Premium Account (SPA).
Important: SPA is not a free reserve. It can be used only for the specific purposes listed in Section 52(2).
#### Permitted uses of Securities Premium
1. Issue of fully paid bonus shares;
2. Writing off preliminary expenses of the company;
3. Writing off issue expenses — including commission and discount on issue of shares/debentures;
4. Premium on redemption of preference shares or debentures; or
5. Buy-back of own securities under Section 68.
#### Restricted list for AS-compliant companies
Prescribed companies whose financial statements comply with the Accounting Standards under Section 133 may use the securities premium only for:
- Issue of fully paid bonus shares,
- Writing off preliminary expenses,
- Buy-back under Section 68, AND
- Writing off issue expenses only of equity shares.
(They CANNOT use it for (3) generally, or for (4) premium on redemption.)
### Issue at Discount — Section 53
Section 53 prohibits issue of shares at a discount.
#### The only two carve-outs
1. Sweat equity shares under Section 54 (which by definition may be issued at a discount in recognition of know-how / IPR / value addition); AND
2. Issue to creditors converting debt into shares under a statutory resolution plan or debt restructuring scheme.
#### Consequence of issuing at discount otherwise
If shares are issued at a discount in contravention of Section 53, the issue is void.
### Punishment for default under Section 53
| Defaulter | Punishment |
|---|---|
| Company | Refund money received from such shares with interest @ 12% p.a. from the date of issue of such shares |
| Officer in default | Fine of lower of ₹ 5 lakhs or the amount raised from such shares |