Share issue at discount | AccountingWEB

Share issue at discount

A limited company has 1,000 authorised shares at nominal value £5,000 per share. The business has allotted two shares at this stage, 1 share to each of the two directors, the two shares are fully paid up for £10,000. A new investor wishes to buy a third of the authorised equity (333 shares) for £333,000 at a discount of £4,000 per share under the par value.

If I remember correctly it is not permissible for companies to issue shares at a discount (not sure why this would be, they are after all allowed to issue at a premium?). The business is keen to get the investment it needs but the investor wants 33% of the business for his money. The business has a net worth of just £10,000 at this stage, so the investor is paying £333,000 for just 33% of £10,000 (as the potential for the business is very good). Although the shares would be issued at a discount they are in fact way over the balance sheet valuation of the percentage ownership being given away.

What's the best way forward to expedite this deal?


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One third

davidwinch |
davidwinch's picture

Why authorised share capital?

petersaxton |
petersaxton's picture

David/ petersaxton, I agree

zelizeli |
zelizeli's picture

Shareholder agreement

petersaxton |
petersaxton's picture

Two things

cparker87 |