Formation of company and raising funds often demand the basic understanding of many concepts and some terms may sound confusing. Below are a few oft-used terms pertaining to shares:
Nominal value or Face Value: The minimum amount to be paid against any shares. A share may be of Taka 100 or Taka 10 or Taka 1000 or more. For example, if the face value of share is Taka.10.00, usually (see Discount below) the minimum amount to be paid against such share will be Taka 10.00. The lower denomination of shares permits increased liquidity of shares.
Share Premium: The additional price paid against a share over and above the face value. So, for example, when Taka 60.00 is paid against a share having a face value of Taka 10.00, the shareholder is paying Taka 50.00 in premium. The premium shall not form part of paid-up capital but under the company laws of Bangladesh, it will attract various restrictions as to its use. The premium of shares are determined by various determinants including the underlying assets of a company, value of business, scope and prospect of growth of the business etc.
Discount: When the shares are issued at a price below the nominal below, the shares will be regarded as having been issued on discount. Shares can be issued on discounts only by obtaining approval of the shareholders in a general meeting and sanction of the High Court and it is not generally advisable to opt for discounting the shares.