Share premium
The excess amount received by the company over the face value when shares are issued above par — for example a Rs.
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- Authorised capitalThe maximum amount of share capital a company is allowed to issue, fixed in its Memorandum of Association — a ceiling on what can be created, not money the company has.
- BuybackA company purchasing its own shares out of reserves and extinguishing them, reducing share capital and raising earnings per share for the shareholders who remain.
- Corporate actionAn event initiated by a company that changes the securities it has issued — dividend, buyback, bonus, split, consolidation, rights issue or merger — and which the registrar has to execute investor by investor.
- Face valueThe denomination a company's capital is divided into and carried in its books — fixed, printed on the certificate, and the base on which dividend percentages and stock splits are computed.
- Liquidity riskThe risk of being unable to get out of a position at or near the quoted price — because the contract is bilateral, because the order book is thin, or because volumes dry up near expiry.
- Paid-up capitalThe part of the issued capital that shareholders have actually paid for — issued capital less the calls still outstanding on partly paid shares.
Where this is taught
- Series II-A · Chapter 2: Characteristic of Equity Sharesintroduced here
- Series II-B · Chapter 2: Characteristic of Equitiesintroduced here
Related terms
- Authorised capitalThe maximum amount of share capital a company is allowed to issue, fixed in its Memorandum of Association — a ceiling on what can be created, not money the company has.
- Paid-up capitalThe part of the issued capital that shareholders have actually paid for — issued capital less the calls still outstanding on partly paid shares.
- Convertible debenturesDebentures that turn into equity shares on terms fixed at issue — the investor draws a coupon until conversion, and the company settles the debt in shares instead of cash.
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