share premium

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Sanjay Jain (Querist)

31 July 2009 what are the uses of money lying in share premium a/c? whether it can be used for normal course of business of the co.?

Also if a company receives application money from a applicant with premium then till allotment how the money + premium received should be disclosed?

Whether share premium is a free reserve?

Ankur Garg

Ankur Garg (Expert)

31 July 2009 Hi,

Section 78 deal with Utilisation of share premium account

The security premium account may, be applied by the company—

(i) in paying up un-issued securities of the company to be issued to members of the company as fully paid bonus securities;

(ii) in writing off the preliminary expenses of the company;

(iii) in writing off the expenses of, or the commission paid or discount allowed on, any issue of securities or debentures of the company; or

(iv) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.

Regards

Sanjay Jain

Sanjay Jain (Querist)

01 August 2009 In that case if a company raises capital on premium thru ipo or pvt equity then is it doing the same for above mentioned purposes? or for expanding its main core business which will increase its value?

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