Q.What does premium mean?

Premium is the excess of the issue price of a share over its face value.

In the GSEB Class-12 Secretarial Practice chapter on issue of shares, a share has a fixed face (nominal) value. A company with a good reputation and prospects may issue its shares at a price higher than this face value. The extra amount collected above the face value is called the share premium.

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Premium is the excess amount charged on a share above its face value.

A company may issue shares at par (issue price equal to face value) or at a premium (issue price above face value). The premium is the difference between the issue price and the nominal/face value — for example, if a share of face value 10 is issued for 15, the premium is 5 per share. It is collected in addition to the face value and credited to the Securities Premium Account, which can be used only for the purposes the Companies Act permits (such as issuing bonus shares or writing off preliminary/issue expenses). I …