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Business Studies

Preference Shares

A new company...

Question

A new company wants to issue share at premium. The maximum rate of premium will be __________ .

A

No limit

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B

10%

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C

30%

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D

15%

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Solution

The correct option is A No limit
Where a company issues shares for which a premium is received by the company whether in cash or in the form of other valuable consideration a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account called the "share premium account" and the provisions of this Act relating to the reduction of the share capital of a company shall subject to this section apply as if the share premium account were paid-up share capital of the company.

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