CA Intermediate · Corporate and Other Laws · Share Capital and Debentures
Kaveri Engineering Ltd, a public company, allotted 10,000 equity shares of Rs 10 each at a premium of Rs 40 per share. The company wants to use the securities premium account. Which of the following uses of the securities premium account is NOT permitted under section 52 of the Companies Act, 2013?
Securities premium cannot be used to pay dividend to shareholders. Section 52 permits it only for specified purposes such as issuing fully paid bonus shares, writing off preliminary expenses, issue expenses and commission, providing premium on redemption of preference shares or debentures, and buy-back of securities.
- APaying up unissued shares of the company to be issued to members as fully paid bonus shares
- BWriting off preliminary expenses of the company
- CProviding for the premium payable on redemption of redeemable preference shares
- DPaying the regular annual dividend to equity shareholdersCorrect
Explanation
Section 52 permits securities premium to be applied for issuing fully paid bonus shares, writing off preliminary expenses, writing off share or debenture issue expenses and commission, providing for the premium on redemption of preference shares or debentures, and buy-back. Paying dividend is not a permitted use, since premium is a capital reserve in nature and not distributable.
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