We have found that a lot of companies who want to redenominate their share capital do so because they have shares with nominal values in different currencies and want to align them. Why undertake a redenomination of share capital? The nominal value of a share is in a particular currency and is usually a low figure, such as £1.00 or £0.01, but the price paid for the share is usually higher and includes the share premium. Each share in a company limited by shares has a nominal value (also known as par value), which is its face value. What is a redenomination of share capital?Ī redenomination of share capital is to convert shares from having a fixed nominal value in one currency to having a fixed nominal value in another currency. Accordingly, we thought it would be useful to share some examples of the issues to consider before effecting a redenomination.

Recently, our corporate law team have been assisting a number of clients with redenominating their share capital. The Capital surplus/Share premium account is not distributable, however, in restricted circumstances it can be reduced: ▪ to write off the expenses/commission relating to the issue of those shares ▪ to make a bonus issue of fully paid-up shares.Redenomination of share capital: initial considerations Some other scenarios for triggering Capital Surplus include when the Government donates a piece of land to the company. Shares for which there is no par value will generally not have any form of capital surplus on the balance sheet all funds from issuing shares will be credited to common stock issued.

Taken together, common stock issued and paid plus capital surplus represent the total amount actually paid by investors for shares when issued. It is a very broad concept and includes tax related and conversion related adjustments. This is called as Additional paid in capital in US GAAP terminology but, additional paid in capital is not limited to share premium. Capital surplus is used to account for that amount which a firm raises in excess of the par value of the shares. Capital surplus Capital surplus is a term that frequently appears as a balance sheet item as a component of shareholders' equity.

Uses of share premium