Difference Wiki

Share Capital vs. Share Premium: What's the Difference?

Edited by Sara Rehman || By Sumera Saeed || Published on December 7, 2023
Share capital is the money raised by a company through the issuance of shares, while share premium is the extra amount paid by shareholders over the nominal value of the shares.

Key Differences

Share capital represents the funds that a company raises by selling its shares at face value or par value to investors. Share premium, on the other hand, is the additional amount paid by shareholders over and above the nominal value of the shares.
Sumera Saeed
Dec 07, 2023
The share capital of a company is typically documented at the time of its establishment and can be seen on the company’s balance sheet. While, share premium is accounted for separately and often forms part of the shareholders' equity but is not part of the share capital.
Sumera Saeed
Dec 07, 2023
Share capital is fundamental to a company’s financial structure and is used to determine the company’s ownership structure. However, share premium is used for various purposes such as issuing bonus shares, writing off expenses or losses, or for legal requirements.
Sara Rehman
Dec 07, 2023
Changes in share capital can occur with further share issuances or buybacks. Meanwhile, share premium remains constant unless additional shares are issued at a price above their nominal value.
Harlon Moss
Dec 07, 2023
Share capital indicates the initial investment in the company made by the shareholders. In contrast, share premium is a reflection of the confidence of investors in the company, often indicating the market’s perception of the company’s value beyond its face
Harlon Moss
Dec 07, 2023
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Comparison Chart

Definition

Money raised by issuing shares at nominal value
Extra amount paid over the nominal value of shares
Sumera Saeed
Dec 07, 2023

Documentation

Documented at establishment, shown on balance sheet
Accounted for separately, part of shareholders' equity
Sumera Saeed
Dec 07, 2023

Use

Determines company’s ownership structure
For issuing bonus shares, writing off expenses
Sara Rehman
Dec 07, 2023

Changes

Occurs with further issuances or buybacks
Changes with issuance of shares above nominal value
Sumera Saeed
Dec 07, 2023

Indication

Initial investment by shareholders
Investors’ confidence and market perception
Harlon Moss
Dec 07, 2023
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Share Capital and Share Premium Definitions

Share Capital

Documented in the company’s financial statements.
The balance sheet shows a share capital of $500,000.
Sara Rehman
Nov 19, 2023

Share Premium

Represents the additional confidence investors have in the company.
The high share premium reflects strong market belief in the company's potential.
Sara Rehman
Nov 19, 2023

Share Capital

Can be altered by issuing more shares or buybacks.
The company decided to increase its share capital by issuing new shares.
Sumera Saeed
Nov 19, 2023

Share Premium

Can increase with the issuance of shares above their nominal value.
The latest funding round significantly increased the company's share premium.
Harlon Moss
Nov 19, 2023

Share Capital

A measure of a company’s funding raised through equity.
The start-up raised its share capital to finance new projects.
Janet White
Nov 19, 2023

Share Premium

Often used for statutory reserves or issuing bonus shares.
The share premium was used to issue bonus shares to existing shareholders.
Sumera Saeed
Nov 19, 2023

Share Capital

The total amount of money raised through the sale of shares at par value.
The company's share capital was set at $1 million at incorporation.
Sumera Saeed
Nov 19, 2023

Share Premium

The amount received over the par value of shares when they are issued.
The company issued shares at a premium, raising its share premium account.
Sumera Saeed
Nov 19, 2023

Share Capital

Represents the initial investment made by the shareholders.
Increasing the share capital can dilute existing ownership percentages.
Sumera Saeed
Nov 19, 2023

Share Premium

A part of shareholders' equity but not of share capital.
Their balance sheet shows a separate entry for share premium.
Aimie Carlson
Nov 19, 2023

FAQs

What is share capital?

Share capital is the money a company raises by issuing shares of stock.
Sumera Saeed
Dec 07, 2023

How is share capital shown on a balance sheet?

It's recorded under the shareholders' equity section.
Sumera Saeed
Dec 07, 2023

Can share capital be reduced?

Yes, through buybacks or capital reduction strategies.
Harlon Moss
Dec 07, 2023

What is authorized share capital?

The maximum amount of share capital a company is allowed to issue, as per its articles of association.
Aimie Carlson
Dec 07, 2023

What are the types of share capital?

Common types include authorized, issued, subscribed, paid-up, and called-up capital.
Sara Rehman
Dec 07, 2023

Can share capital be increased?

Yes, through issuing more shares or rights issues.
Aimie Carlson
Dec 07, 2023

Is share premium refundable?

No, it's not refundable to shareholders.
Sumera Saeed
Dec 07, 2023

What is share premium?

It's the extra amount over the nominal value of shares, paid by shareholders when the shares are first issued.
Janet White
Dec 07, 2023

How does share capital impact shareholders?

It represents shareholders' stake in the company.
Sumera Saeed
Dec 07, 2023

What is paid-up share capital?

The portion of issued capital that shareholders have paid for.
Harlon Moss
Dec 07, 2023

Does share capital pay dividends?

Dividends are paid out of profits, but share capital can affect the dividend per share.
Janet White
Dec 07, 2023

What does a high share premium indicate?

It indicates strong investor confidence in the company.
Aimie Carlson
Dec 07, 2023

How is share premium used by a company?

It can be used for issuing bonus shares, writing off expenses or losses, or providing for premium on redemption of debentures or shares.
Sumera Saeed
Dec 07, 2023

Is share capital returned to investors?

Not typically; it remains invested in the company until liquidation or share repurchase.
Janet White
Dec 07, 2023

How is share premium recorded?

It's recorded in the share premium account under shareholders' equity.
Aimie Carlson
Dec 07, 2023

How does share premium affect share capital?

It doesn't directly affect share capital but adds to the company's overall equity.
Sumera Saeed
Dec 07, 2023

What happens to share premium in a buyback?

It can be used to fund the buyback of shares.
Harlon Moss
Dec 07, 2023

Can share premium be distributed as dividends?

Usually not; it's often used for purposes like writing off incurred expenses or issuing bonus shares.
Sumera Saeed
Dec 07, 2023

Is share premium common?

Yes, especially when shares are issued at a price higher than their nominal value.
Aimie Carlson
Dec 07, 2023

Can share premium be negative?

No, it cannot be negative.
Aimie Carlson
Dec 07, 2023
About Author
Written by
Sumera Saeed
Sumera is an experienced content writer and editor with a niche in comparative analysis. At Diffeence Wiki, she crafts clear and unbiased comparisons to guide readers in making informed decisions. With a dedication to thorough research and quality, Sumera's work stands out in the digital realm. Off the clock, she enjoys reading and exploring diverse cultures.
Edited by
Sara Rehman
Sara Rehman is a seasoned writer and editor with extensive experience at Difference Wiki. Holding a Master's degree in Information Technology, she combines her academic prowess with her passion for writing to deliver insightful and well-researched content.

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