What is No Par Value Share?
No Par Shares is the shares which have no face value. A company issues these shares which are divided into a number of specific shares without any specific information. This shares can be measured by dividing the real net worth of the company with the total number of shares.
Value of No par share = Total real net worth/ Total number of shares
This share is issued without any specification of a par value mentioned in the articles of incorporation or on the stock certificate of the company. Most shares issued as classified as no-par value or low par value stock. Shares prices are determined by the amount that investors are intended to pay for stocks on the open market.
What are the objectives of No Par Share?
The objectives of no par value shares are as follows:
- The scope of avoiding taxes levied according to the share’s face value
- To avoid the liability of issuers to shareholders in the event the shares have to be sold at a discount
- To eliminate investors confusion regarding par value and real market (value) of the share
Proceeds realized from share sales are accounted for by debiting the cash account and crediting the capital share account, thus assigning an implicit value to the issued shares. These shares are common in Belgium, Canada and the United States (U.S.), but illegal in the UK.