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

Under Section 52(2) of the Companies Act, 2013, the securities premium account may be applied towards issue of unissued shares to members as fully paid bonus shares. Which statement about Aarav Ltd using it this way is correct?

Aarav Ltd may apply its securities premium account towards issuing unissued shares to members as fully paid bonus shares, because Section 52(2)(a) expressly lists this as a permitted use. It is not limited to debenture redemption or buy-back.

  1. AIt is permitted, as the section lists bonus issue of unissued shares as an applicationCorrect
  2. BIt is prohibited, because premium can only be used to redeem debentures
  3. CIt is permitted only for buying back shares
  4. DIt is prohibited, because bonus shares must come only from share capital

Explanation

Section 52(2)(a) expressly lists application towards issue of unissued shares to members as fully paid bonus shares. The other options misstate the section, which lists several permitted uses and not only debenture redemption or buy-back.

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