Skip to content

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

Tara Foods Ltd, after a public issue, holds a balance in its securities premium account. The board wants to use it for several purposes. Under Section 52(2) of the Companies Act, 2013, which of the following applications is permitted for a company not relying on the sub-section (3) relaxation?

Writing off the commission paid or discount allowed on an issue of shares or debentures is permitted. Section 52(2) gives a closed list of uses of the securities premium account, and dividend, trading losses or buying land are not on that list.

  1. AWriting off the commission paid or discount allowed on an issue of shares or debenturesCorrect
  2. BPaying dividend to equity shareholders
  3. CWriting off accumulated trading losses
  4. DPurchasing land for a new plant

Explanation

Section 52(2) lists permitted uses: fully paid bonus shares, writing off preliminary expenses, writing off expenses, commission or discount on issue of shares or debentures, premium payable on redemption of redeemable preference shares or debentures, and buy-back under section 68. Dividend, trading losses and land purchase are not listed, so the account cannot be applied to them.

Did you get it right without looking?

One question tells you little. A timed set on Issue of Capital and Disclosure Requirements shows your real accuracy, how long you take and where you lose marks.

Practise Issue of Capital and Disclosure RequirementsFree diagnostic mock

More Issue of Capital and Disclosure Requirements questions