Disadvantages

1. Protection is not automatically provided by no-par stock.
2. The management in the absence of standard value may split up the price received into two parts. i.e. nominal amount may be credited to the stated paid-up capital and the remainder credited to capital surplus which may later on be utilized in distributing the dividends.
3. The existence of a sizable surplus may lead the Board of Directors to think that the surplus is the result of accumulated earnings and is available for distribution as dividends. But, in reality, it may be the sale proceeds of no-par stock.
4. The flexibility of setting up the capital account may be responsible for the undue payment for the promoters’ services and for goodwill.
5. The declaration of no-par stock dividend may divide the capital amount into a large number of shares