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

Which of the following is a use of the securities premium account that Section 52(3) of the Companies Act, 2013 allows for a prescribed class of companies complying with the accounting standards under section 133, as per the official text?

Prescribed companies whose financial statements comply with the accounting standards may apply the securities premium account in paying up unissued equity shares to be issued to members as fully paid bonus shares. Section 52(3) lists this, whereas dividends and investment losses are not permitted uses.

  1. APaying up unissued equity shares to be issued to members as fully paid bonus sharesCorrect
  2. BProviding for premium payable on redemption of debentures only
  3. CDistributing the balance as dividend
  4. DWriting off the loss on sale of investments

Explanation

Section 52(3)(a) allows such prescribed companies to apply the account in paying up unissued equity shares issued to members as fully paid bonus shares. The other options are not found in sub-section (3); redemption premium appears in sub-section (2) and dividends and investment losses are not permitted uses.

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