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