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by Undo Capital
December 15, 2025
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What Is a Share Premium Account?

A share premium account is the equity reserve that records the amount investors pay above the nominal (par) value of a company’s shares.

Share Premium Account Meaning

The share premium account's meaning centres on capturing the additional capital a company receives when issuing shares at a price higher than their nominal value. To define the share premium account in practice, if a company issues £0.01 nominal shares for £1.00, the extra £0.99 per share is credited to the share premium account. A clear share premium account definition is important because these funds are restricted by company law—they cannot be freely distributed as dividends but may be used for purposes like paying share issue costs or creating bonus shares. The share premium account stands for transparent reporting of investor capital beyond nominal share value.

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Disclaimer: Our services are designed to assist startups and businesses with company formation, legal agreements, and funding-related documentation. We do not provide investment advice, financial advice, or tax advice, nor are we regulated by the Financial Conduct Authority (FCA). Participating in startups and early-stage enterprises carries inherent risks, including limited liquidity, absence of dividends, potential loss of investment, and dilution. Any decisions regarding investments should be made independently by the investor as part of a well-diversified portfolio.