Share premium

Share premium is the amount shareholders pay for a share above its nominal value — if a €1 nominal share is issued at €4, the €3 excess is share premium; it forms part of equity but cannot ordinarily be distributed as a dividend.

ByHoang TruongUpdated July 3, 2026

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A company issues 100,000 shares with a nominal value of €0.50 each at a price of €3.50, raising €350,000 in total. Of that, €50,000 — the nominal value times the number of shares — becomes share capital, while the remaining €300,000 excess is credited to share premium. Share premium sits within equity but, like share capital, cannot ordinarily be distributed as a dividend.

Where it fits

SubjectFinancial AccountingCoreTopicThe Accounting Equation & Its ElementsCore

The formula

LaTeX

\text{Share Premium} = (\text{Issue Price} - \text{Nominal Value}) \times n_{\text{shares}}

Variables

$I ss u e P r i ce$: Amount paid per share at issuance (€)
$N o mina l V a l u e$: Legal face value per share (€)
$n_{s} ha r es$: Number of shares issued in the transaction (shares)

Total credited to the share premium account; non-distributable in most jurisdictions and therefore not available to pay as a dividend.

Check yourself

PracticeCORE

Meridian plc issues 500,000 new ordinary shares with a nominal value of €0.50 each at an issue price of €2.30 per share. Which of the following correctly states the amounts credited to the share capital and share premium accounts?

Select an answer to check your understanding.