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Companies Act 1947

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72Application of premiums received on issue of shares.

(1)Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called " the share premium account ", and the provisions of the principal Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the share premium account were paid up share capital of the company.

(2)The amount of the share premium account shall be shown in every balance sheet of the company.

(3)The share premium account may, notwithstanding anything in subsection (1) of this section, be applied by the company in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares, in writing off—

(a)the preliminary expenses of the company;

(b)the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company;

or in providing for the premium payable on redemption of any redeemable preference shares or of any debentures of the company.

(4)Accordingly in proviso (d) to subsection (1) of section forty-six of the principal Act (which requires the premium, if any, payable on redemption of redeemable preference shares to be provided for out of the profits of the company) after the words " the profits of the company " there shall be inserted the words " or out of the company's share premium account/'

(5)Where a company has before the coming into force of this section issued any shares at a premium, this section shall apply as if the shares had been issued after the coming into force thereof:

Provided that any part of the premiums which has been so applied that it does not at the coming into force of this section form an identifiable part of the company's reserves within the meaning of the First Schedule to this Act shall be disregarded in determining the sum to be included in the share premium account.

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