Question

What are the uses of securities premiums?

Answer 1

According to Section 52(2) of the Companies Act, 2013, the amount standing in the Securities Premium Reserve Account is a capital receipt and can legally be utilised by a company only for the following specific purposes:

• To issue fully paid-up bonus shares to the existing members of the company.
• To write off the preliminary expenses incurred during the formation of the company.
• To write off the expenses, commission paid, or discount allowed on the issue of any shares or debentures of the company.
• To provide for the premium payable on the redemption of redeemable preference shares or debentures of the company.
• To finance the buy-back of its own shares or other specified securities.