Section 34Part 3 — Distribution of Capital and Liability of Members
Share premium account
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Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the value of the premiums on those shares shall be transferred to an account called “the share premium account”. Where a company issues shares without nominal or par value, the consideration received shall be paid up share capital of the company.
The share premi um account may be applied by the company subject to the provisions, if any, of its memorandum or articles of association in such manner as the company may, from time to time, determine including, but without limitation —
paying distributions or dividen ds to members;
paying up unissued shares of the company to be issued to members as fully paid bonus shares;
any manner provided in section 37 ;
writing off the preliminary expenses of the company; and
writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company. Provided that no distribution or dividend may be paid to members out of the share premium account unless, immediately following the date on which the distribution or dividend is proposed to be paid, the company shall be able to pay its debts as they fall due in the ordi nary course of business; and the company and any director or manager thereof who knowingly and wilfully authorises or permits any distribution or dividend to be paid in contravention of the foregoing provision commits an offence and is liable on summary co nviction to a fine of fifteen thousand dollars and to imprisonment for five years.
Where a company had, before the 18th day of January, 1988, issued any shares at a premium, this section shall apply as if the shares had been issued after such date.
At the option of the company, subsection (1) shall not apply to premiums on shares of a company allotted in pursuance of any arrangement in consideration for the acquisition or cancellation of shares in any other company, whether a company within the mean ing of this Act or not, and issued at a premium.
At the option of the company, an amount corresponding to any amount representing the premiums or part of the premiums on shares issued by a company which, by virtue of subsection (4), is not included in such company ’ s share premium account may also be disregarded in determining the amount at which any shares or other consideration provided for the shares issued is to be included in such company ’ s balance sheet.
For the purposes of subsection (4) — “ ar rangement ” means any agreement, scheme or arrangement, whether of reconstruction, merger, consolidation, take - over, acquisition, purchase or otherwise whereby the allotting company acquires a controlling interest in the company whose shares it acquires or cancels.
The relief allowed by subsections (4) and (5) shall apply even if the issue of shares took place prior to the 18th day of January, 1988.