use of amt of share premium

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This query is : Resolved

seema singla (Querist)

20 July 2009 A pvt. ltd co. collected amt on share premium. I want to know the practical use of this amt. It should be deposited in a bank or A FDR can be m ade and against it , a loan can be taken or anything else. Please respond as it is very urgent and important.

Rasesh

Rasesh (Expert)

20 July 2009 Securities Premium Amount can be utilised only in accordance with the provisions of Section 78 of the Companies Act, 1956.

Depositing the physical amount in a bank or creating an FD out of the amount has not restrictions. It is the end use of the Securities Premium Account that carries the restrictions.

Venkat Rao Marella

Venkat Rao Marella (Expert)

20 July 2009 Securities premium account can be utilized only for the following four purposes (As laid down in Sec 78 of Companies Act, 1956):
• For issuing bonus shares
• For writing off preliminary expenses
• For writing off debenture issue expenses/discounts on issue of debentures etc
• For providing premium payable on redemption of redeemable preference shares or Debentures.

Ankur Garg

Ankur Garg (Expert)

22 July 2009 You may also use it for Buy Back of Equity shares.

Check Section 77A (1) (ii)

Regards

seema singla

seema singla (Querist)

22 July 2009 I know sec. 78 which gives how to use the money. If one donot use it according to sec 78, then this amt is to be kept in a bank account obviously. But this is not so beneficial for the company. I wnat to know it can be invested? How big companies use/invest their share premium account.