Audit of Shares Issued at Premium
Share premium can be defined as the excess amount received by the company over and above the face value of shares. All types of companies can issue shares at premium. The auditor should examine the Prospectus, the Articles and the Minutes of the Directors to see whether the issue of shares at a premium is duly authorized or not. He should see that the sum available has been utilized in the manner as laid down by the Articles.
Share premium means the shares are issued at an amount in excess of the nominal value of the shares. Section 52, of the Companies Act, 2013 states that, if a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares shall be transferred to a Share Premium Account. The auditor should examine the Articles, Minutes of Board meetings to see whether issue of shares at a premium is duly authorized.
The auditor should see that the amount of share premium is utilized in the manner laid down in Section 52. The share premium account may be used by the company only for –
· Issuing fully paid bonus shares to the members of the company.
· Writing off preliminary expenses or commission paid or discount allowed on any issue of shares or debentures of the company.
· Providing for the premium payable on the redemption of any redeemable preference shares of the company.
· Buying back own shares, if Articles permits it and authorized by special resolution passed in general meeting.