Companies Act 2006 s.610 in the United Kingdom the share premium account may be used only for certain specific purposes. However, UK company law in this connection was significantly relaxed in 2008 by permitting the share premium account to be converted into share capital and then the share capital to be reduced (effectively allowing the elimination of the share premium account by a two-stage process). Under companies ordinance 1984 (Nepal) s.84: (1) If a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account called "the share premium account". (2) The share premium account may be applied by the company in paying up unissued shares to be allotted to members as fully paid bonus shares, or in writing off- (a) the company's preliminary expenses; or (b) the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company, or (c) in providing for the premium payable on redemption of debentures of the company. (3) Subject to this, the provisions of this Act relating to the reduction of a company's share capital apply as if the share premium account were part of its paid up share capital. A company's SPA is a part of creditors' buffer. Assets: Cash: $450 Liabilities: Nil Shareholders' equity: Common stock: $100 Preference stock: $25 Share premium: $325 SPA = Number of new shares issued x (issue price - par value) See also Bond (finance) Common stock Preferred stock Treasury stock Paid in capital Reserve (accounting) Shareholders' equity External links Capital Surplus Capital Surplus and Proprietorship Reserves References Accounting terminology Financial capital