Securities Premium reserve funds cannot be legally used for which of the following purposes?
- AIssuing fully paid Bonus shares to existing members
- BWriting off the preliminary expenses of the company
- CPaying a premium due on the redemption of preference shares or debentures
- DDistributing cash dividends to the shareholders of the company
Solution & Step-by-step Explanation
Section 52(2) of the Companies Act, 2013 strictly restricts how the Securities Premium Account can be used. It can be used to issue fully paid bonus shares, write off preliminary expenses, or pay redemption premiums. However, it is a capital profit and \textbf{cannot be used to distribute cash dividends} to shareholders. Dividends can only be paid out of divisible revenue profits.