Par Value

What is the equating value rule and what purposes does it seek to serve? establish to what extent the use of non-cash consideration for sh ares may affect the equality value rule.
What is the Par Value rule and its purpose?
every(prenominal) familiarity has to get hold of a plow cracking which its members own. Shares are issued by the directors as stated in the participations Memorandum at par value or nominal value. The present rightfulness requires the companys memorandum to state the division of plow handle capital into shares of a fixed amount and therefore a share moldiness have monetary value attached to it such as 1000 shares of 1 each or 0.50p each and so forth The Memorandum of Articles state the nominal value of each share which is also known as the par value. Depending on what the grocery store value, the shares can be issued at a price higher(prenominal) than its nominal value. This excess amount is recorded as a premium separately and would be treated as capital.

The shares issued to electric potential investors are usually above the nominal or par value of the shares of the company. This is because when the directors set up the company with a share capital of nominal value and trade successfully in the first place issuing further shares to raise capital to support expansion.



If these shares, which have been issued, after few successful years of trading so the shareholders stand to acquire a larger proportion of intimacy in the company and a share of the profits realise in the past before they even invested in the company without contributing anything towards the capital which was used to earn those profits. By offering the second lot of shares at higher than its par or nominal value this situation is somewhat rectified. These shares in bowl over represent the total value of shareholders interest in the company as a whole in addition to the companys juristic capital.
Generally a share of a company represents a strictly defined fraction of the entire share capital of that company, whether that share has a nominal value or that share is one of no par value....If you want to get a full essay, order it on our website: Orderessay



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