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CS Executive · Capital Market and Securities Laws · Issue of Capital and Disclosure Requirements

Arjun Components Ltd, whose financial statements comply with the notified accounting standards, wants to use its securities premium account. Under Section 52 of the Companies Act, 2013, which application is expressly permitted under Section 52(2)?

The securities premium account may be applied in writing off the preliminary expenses of the company. Section 52(2) lists this use along with bonus shares, issue expenses, redemption premium and buy-back. Paying dividends, writing off trading losses or buying assets are not permitted applications.

  1. AWriting off the preliminary expenses of the companyCorrect
  2. BPaying an interim dividend to equity shareholders
  3. CWriting off accumulated trading losses
  4. DBuying fixed assets for the factory

Explanation

Section 52(2)(b) permits application of the securities premium account in writing off preliminary expenses. Dividend payment, writing off trading losses and purchasing assets are not listed uses, and the account is otherwise treated like paid-up share capital for reduction purposes under Section 52(1).

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