A company wishes to repurchase some shares which were issued some years ago for a nominal value of £1 + £24999 share premium. The consideration for the repurchase is £20,000. Distributable reserves stand at £100,000. Can the company set the £20000 against the share premium on the original issue or must it set it against the distributable reserves?
Guidance much appreciated.
Richard
Richard Condon
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My view
Step 1
Debit Share capital £1 and Share pemium £24,999 crediting Capital redemption reserve.
Step 2
Dr Reserves £20,000
Cr Cash