Face value, Securities Premium Reserve under Sec. 52, and the legality of issuing shares at a discount under Sec. 53 / Sec. 54.
What is Face Value / Par?
The face value (or nominal value / par value) is the value printed on the share certificate and stated in the Memorandum of Association. Common Indian face values are ₹1, ₹2, ₹5 and ₹10. The face value is the basis on which dividend is declared (e.g., 12% dividend on a ₹10 share = ₹1.20 per share).
Issue at Par
A share is said to be issued at par when its issue price = face value. For a ₹10 share, the company collects exactly ₹10 from the shareholder (in one or more installments).
Issue at Premium (Sec. 52)
When issue price > face value, the excess is called Securities Premium and is credited to a separate account — Securities Premium Reserve. Section 52 restricts its use to:
- Issue of fully paid bonus shares.
- Writing off preliminary expenses.
- Writing off discount/expenses on issue of shares or debentures.
- Providing premium on redemption of preference shares or debentures.
- Buy-back of own shares u/s 68.
Premium can be called at application, allotment or any specific call — most commonly at allotment.
Issue at Discount — Rules
Section 53 of the Companies Act, 2013 prohibits issue of shares at a discount. Any such issue is void. The only exception is Section 54 which permits issue of Sweat Equity Shares at a discount to directors / employees, subject to conditions.
Swathika B is an MBA graduate in Finance & Business Analytics , the founder of The Commerce Lab. With a strong academic foundation in B.Com BFSI and hands-on experience in financial analysis, data analytics, and business studies, she created this platform to make Commerce and Accountancy simple, practical, and exam-ready for students across India.