The balance in the securities premium account cannot be used for which of the following purposes?
- ATo write-off the expenses of preliminary expenses of the company
- BTo issue fully paid bonus shares
- CTo pay off the purchase consideration.
- DTo write off discount on issue of debentures.
Solution & Step-by-step Explanation
According to Section 52(2) of the Companies Act, 2013, the balance in the Securities Premium Account can be utilized only for the following specific purposes:To issue fully paid bonus shares to the members.To write off preliminary expenses of the company.To write off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company.To provide for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.For the purchase of its own shares or other securities (buyback under Section 68).It cannot be utilized to pay off purchase consideration to a vendor when acquiring a business or an asset.