Why companies issue shares at premium? Obviously companies issue shares at premium when they feel that the company is doing well and its share can fetch more money than its face value. Bonus shares are issued by companies to capitalise their revenue as well as capital reserves. In simple words a company issues bonus shares to its shareholders for free by utilising the reserves lying with the company. Security Premium account can also be used to issue bonus shares. What purpose will be served if a company issues bonus shares at premium? No. purpose. The use of Security Premium is restricted. So why shall a company want to put its free reserves or profits in an account which has restive use? So in my opinion a company cannot issue bonus shares at premium.