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Which of the following is not a purpose for which the Securities Premium amount can be used ? -

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Question

Which of the following is not a purpose for which the Securities Premium amount can be used ?

Options

  • Issuing fully paid bonus shares to shareholders

  • Issuing partly paid up bonus shares to shareholders

  • Writing off preliminary expenses of the company

  • In purchasing its own shares (buy back)

MCQ

Solution

Issuing partly paid up bonus shares to shareholders

Explanation:

Because the shares are partially paid up, the security premium amount cannot be used to issue partially paid up bonus shares to shareholders.

It can be used for:

  1. The stockholders will receive fully paid-up bonus shares.
  2. To deduct the companies' preliminary expenses.
  3. To deduct the commission paid or expenditures incurred in connection with the issuance of shares or debentures.
  4. To pay a premium on the company's preference shares or debentures being redeemed.
  5. Section 68 allows for the purchase of stock shares and other securities.
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Share Capital - Issue and Allotment of Equity Shares
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