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

Kaveri Pharma Ltd has a balance in its securities premium account arising from a public issue. It proposes four uses. Which use is expressly permitted under Section 52(2) of the Companies Act, 2013 for any company?

Section 52(2) permits using the securities premium account to write off expenses of, or commission paid or discount allowed on, any issue of shares or debentures. Paying dividends, writing off trading losses or buying machinery are not permitted applications.

  1. APaying an interim dividend to equity shareholders
  2. BWriting off the expenses of, or commission paid or discount allowed on, an issue of shares or debenturesCorrect
  3. CWriting off accumulated trading losses of the previous years
  4. DPurchasing plant and machinery for the factory

Explanation

Section 52(2)(c) permits applying the account in writing off expenses, commission or discount on any issue of shares or debentures. Dividend, writing off trading losses and buying machinery are not among the listed applications, so they are not allowed.

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