Additional Info

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Additional Info

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Use of Share Premium Account

Where a company issues shares at a premium, whether for cash or otherwise, it must comply with the following provisions.

  1. Transfer a sum equal to the aggregate premium amount as received to "securities premium account";
  2. The provisions relating to reduction of share capital of a company (under companies act) shall be applicable as if the securities premium account was the paid-up share capital of the company;
  3. The company may use the securities premium account for the following purposes.
    • Bonus shares : Paying up unissued equity shares of the company to be issued to members of the company as fully paid bonus shares; or
    • Writing off : Writing off expenses of / commission paid / discount allowed on any issue of equity share capital; or
    • Writing off : Writing off the preliminary expenses of the company;
    • Provisioning : Providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company;
    • Buy-back : Purchasing its own shares / other securities (section 68).
  4. The securities premium account may be used by such class of companies, as may be prescribed & whose financial statement comply with the accounting standards prescribed for such class of companies under section 133, for the following purpose(s).
    • Bonus shares : Paying up unissued equity shares of the company to be issued to members of the company as fully paid bonus shares; or
    • Writing off : Writing off expenses of / commission paid / discount allowed on any issue of equity share capital; or
    • Buy-back : Purchasing its own shares / other securities (section 68).

The above provisions are prescribed
in the section 52 of the Companies Act, 2013 (earlier section 78 of the companies act 1956).
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