Share Premium Reduction

Overview

The platform supports three main ways to reduce share premium:

1. Company Action: Share Premium Reduction – A standalone capital action that reduces the share premium account by a specified amount
2. Redemption/Repurchase of Shares – Optional share premium reduction when redeeming or repurchasing shares that were issued at a premium.
3. Share Capital Reduction – Optional share premium reduction as part of a capital reduction that cancelled shares that were issued at a premium.

What you'll learn:

• How to perform a standalone share premium reduction
• How to reduce share premium during redemption or repurchase
• How to reduce share premium during capital reduction
• The effects of share premium reduction on your accounts

Method A: Company Action - Share Premium Reduction

This is a standalone capital action that reduces the balance of the share premium account by a specified amount. The reduced amount is typically transferred to either Capital Reduction Reserve or Retained Earnings, depending on the purpose.

Performing a Share Premium Reduction

Step 1: Navigate to Capital Actions

1. Navigate to the Share Class you wish to modify
2. Go to Capital Actions
3. Select Share Premium Reduction

Step 2: Enter Reduction Details

Enter the following information:

• Reduction Amount: Enter the amount by which you wish to reduce the Share Premium account
• Effective Date: Enter the effective date of the reduction

Step 3: Review and Confirm

1. Review the reduction amount and effective date
2. Verify the impact on the share premium account (shown in the preview)
3. Confirm where the reduced amount will be transferred (Capital Reduction Reserve or Retained Earnings)
4. Click Save to complete the reduction

The share premium reduction has been recorded. The share premium account has been reduced, and the amount has been transferred to the designated reserve or earnings account.

Understanding Share Premium Reduction

A standalone share premium reduction decreases the balance of the share premium account by a specified amount. This is typically done to:

• Streamline the financial structure
• Write off losses
• Restructure the company's equity accounts

Key Effects

• Share Premium Account Decreases – The balance is reduced by the specified amount
• Reserve or Earnings Increases – The reduced amount is transferred to Capital Reduction Reserve or Retained Earnings
• Share Capital Unchanged – The nominal share capital remains the same
• Number of Shares Unchanged – The quantity of issued shares is not affected

Method B: Redemption/Repurchase of Shares

When a company redeems preference shares or repurchases its own shares, you can optionally reduce the share premium account to cover any premium payable on redemption or repurchase.

How It Works

During the Redemption of Shares or Share Repurchase process, you can enable an optional share premium reduction:

1. When redeeming or repurchasing shares, the platform checks if the certificate was originally issued at a premium
2. If applicable, you can toggle the Share Premium Reduction option
3. The share premium account is reduced by the original premium amount paid for those shares

Example

If you repurchase a certificate that was originally issued at €5 per share (with a nominal value of €1, meaning €4 premium per share), and you enable share premium reduction:

• The share premium account is reduced by the original premium (€4 × number of shares)
• This reduction is recorded alongside the repurchase transaction

For detailed steps, see:

• Share Repurchase – Step 6 covers share premium reduction
• Redemption of Shares – Includes optional share premium reduction

Method C: Share Capital Reduction

When performing a Share Capital Reduction, you can optionally link a reduction of share premium as part of the restructuring.

How It Works

During the share capital reduction process:

1. Navigate to Capital Actions → Reduction of Share Capital
2. Configure the capital reduction as usual
3. In the advanced options, you can optionally enable Share Premium Reduction
4. Specify the amount of share premium to reduce alongside the capital reduction

Example

If you're reducing share capital and want to also reduce share premium:

• Configure the share capital reduction (e.g., reduce from 1,000 shares to 800 shares)
• Enable the optional share premium reduction
• Specify the amount of share premium to reduce (e.g., €2,000)
• Both reductions are recorded in a single transaction

For detailed steps, see Share Capital Reduction.

Practical Example: Standalone Share Premium Reduction

What Happens Next

After completing a share premium reduction:

• The share premium account balance is updated to reflect the reduction
• The reduced amount is transferred to Capital Reduction Reserve or Retained Earnings (for standalone reductions)
• The transaction appears in the capital actions history
• Financial reports reflect the updated share premium balance

Related Topics

• Capital Actions Overview – Learn about other capital actions you can perform
• Share Premium – Understand what share premium is and how it works
• Share Repurchase – Learn how to reduce share premium during repurchase
• Redemption of Shares – Learn how to reduce share premium during redemption
• Share Capital Reduction – Learn how to reduce share premium during capital reduction
• Setting up Share Classes – Understand how share classes work