# Financial engineering : Question 6How then do you calculate the capital increase and the share premium for the company benefiting from the transfer? What happens if the value of the shares of the company benefiting from the transfer is worth less than their par value (e.g. par value = 100 and market value = 20)?

Be careful not to confuse the estimated market value of the transferred assets, with the book value at which the assets are transferred, from a legal and accounting standpoint. These are two different things.

Once the financial value of the transferred assets is determined, you only have to divide this value by the unit value of the shares of the company benefiting from the transfer, in order to determine the number of shares that will be issued as consideration for the transfer, let's say a million.

Next, you choose a transfer value which will be the legal and accounting value which will appear on the books of the company benefiting from the transfer. This can be the book value of the assets, their estimated market value or an intermediate value. Let's say 100 million. Each newly created share will then have a book value of 100/1 = 100, which will be split into 10 of share capital (if the par value of the company receiving the transfer is 10, for example) and 90 of share premium. However, in finance, the 10 / 90 split is not important. The only thing that counts in finance is the number of shares issued.

If the market value of the shares of the company receiving the transfer is less than their par value, this is most likely because the company was making losses and there are loss-carryforwards. In such cases, these losses must first be set off against the amount of the share capital, which results in a reduction of the par value of the shares, and thus solves the problem.