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Uses of Securities Premium

As per the Co...

Question

As per the Companies Act, 2013, the companies cannot use the balance of securities premium for _____.

A

Premium on redemption of debentures

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B

Issuing bonus shares

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C

Writing off commission on issue of shares or debentures

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D

Loss of issue of debentures

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Solution

The correct option is C Loss of issue of debentures
Security premium account is part of Shareholders Fund , it refers to the difference between market value and face value of the share. Security premium account can not be used for distribution or writing off operating losses of company but it can be used for writing off equity related expenses.

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Q. Assertion :Under the provisions of new Company Act 2013, a company may issue fully paid-up bonus shares out of its free reserves, security premium account and the capital redemption reserve account. Reason: According to the new provisions of Company Act, 2013, no issue of bonus shares shall be made by capitalising reserves created by the revaluation of assets.

Q. Consider the following statements:
1. The bonus shares shall not be issued in lieu of dividend,
2. A company may issue fully paid up bonus shares to its members out of its 'Capital Redemption Reserve Account'
3. A company may not issue bonus shares out of its 'Securities Premium Account'
Which of the above statement/s is are not correct?

Q. According to the Companies Act,

2013

, a company may issue fully paid up bonus shares to its members, out of ___________.

Q. ___________ is used to writing off capital losses or issue of bonus shares in case of a company.

Q. As per Schedule VI of the Companies Act, 1956, under which of the following heads is 'Premium on issue of Preference Shares' shown in the Balance Sheet of a company?

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