The Majlis will debate a government-proposed bill based on which companies listed in the stock market can raise capital via share premium.
Share premium is the difference in price between the par value, or face value of shares, and the total price a company received for recently-issued shares.
Also called capital surplus, share premium cannot be used for distributing dividends or any other payouts and can only be used for whatever has been expressly laid out in the company's bylaws. A share premium account appears in the shareholders' equity section of the balance sheet.
Put simply, share premium is the additional paid-in capital in excess of par value that an investor pays.
Iran’s parliament on Wednesday approved a "double urgency” for the bill, which means lawmakers should decide on the matter immediately.
Supporting the bill, Jafar Qaderi, an MP from Shiraz and a member of the Majlis Economic Commission, said the plan to a large extent will help in creating the supply and demand balance in the stock market, the Securities and Exchange News Agency reported.
“We are seeing liquidity flowing into the capital market every day. There are concerns about mounting demand and declining supply, which causes unreasonable surge in share prices,” he was quoted as saying.
The lawmaker added that administrative bodies that hold stakes in listed companies can raise funds via share premiums to complete unfished projects.
Kazem Delkhosh, another MP backing the plan, said the initiative will help expand the market.
Earlier in June, Governor of the Central Bank of Iran Abdolnasser Hemmati called on lenders to correct their balance sheets by tapping into the fast growing share market and its unpredicted appeal among the public.
He particularly recommended CEOs of banks to recapitalize using share premium, saying “this is a norm widely used in financial systems in the world”.
Under the current condition of the capital market, “banks can help both expand the market and correct their balance sheets by offering shares,” he said, addressing CEOs of banks, the CBI website reported.
Highlight: Supporting the government-proposed bill, Jafar Qaderi, an MP from Shiraz and a member of the Majlis Economic Commission, said the plan to a large extent will help in balancing supply and demand in the stock market
