Common Sense Tends To Go Out Of The Window
f UK companies must have a 'par value', also known as the 'nominal value'. This is the amount that the shareholder originally subscribed (i.e. paid) for the share.
If a company is profitable its shares will soon be worth more than the amount originally subscribed, and this is why shares are usually sold for much more than their par value. However, you cannot measure how well a company is doing simply by dividing its share price by the nominal value. You do not know how long the company has been in existence and how long, therefore, it has taken to build up that value. Similarly you do not know how many rights and bonus issues there have been which would further help to distort such comparison.
The only duty of a shareholder is to pay the par value of the share when called upon to do so. Unless the share is partly-paid, this will have been done when the share was bought. Unlike a member of a partnership, the shareholder cannot be made to cough up any more money if the company goes into insolvent liquidation.
As nominal values are fairly meaningless, the USA and Canada allow shares to be issued at no par value (sometimes abbreviated 'npv'). Such practice is illegal in the UK but overseas npv may legally be traded in the UK. Attempts have been made at various times (the last in 1967) to allow npv shares in the UK, but the idea has always been turned down.
The par value and voting rights determine the 'class'of the share. If two shares have the same value and voting rights, they are said to be of the same class.
Sometimes a company may wish to issue more shares of the same class as shares already in issue. Suppose that these shares were ordinary 25p voting shares which currently enjoy a market value of 60p. Clearly the company will not wish to sell these new shares for only 25p, so the law allows it to sell them at a price above the par value.
The amount of the excess (35p a share in this case) does not become part of the company's ordinary share capital but is shown separately as a share premium account. There are strict rules about what may be done with a share premium account, and also when shares may be issued below t
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