Can securities premium account be used as working capital

Co Act 2013 1080 views 3 replies

DEAR FRIENDS,

CAN SECURITIES PREMIUM ACCOUNT BE USED AS WORKING CAPITAL OF A PRIVATE COMPANY AS PER COMPANIES ACT, 2013?

 

Replies (3)
According to Indian Company Act 1956, the amount of security premium may be used only for the following purposes: To write off the preliminary expenses of the company. To write off the expenses, commission or discount allowed on issued of shares or debentures of the company. To provide for the premium payable on redemption of redeemable preference shares or debentures of the company. To issue fully paid bonus shares to the shareholders of the company.

My question is that a Pvt. CO. Issues shares at premium just to avoid share capital crossing rs.5 cr and to save the stamp duty etc. Can this amount be freely used for any business purpose? Is there some restrictions in the new companies act,2013.

No there is  no restriction as such in Companies Act 2013 and you can freely use amount of share premium.  However, you have to take care of Sec.56 of  Income Tax Act which provides that if shares are issued at premium in excess of actual value of the shares then  the excess amount will be treated as income from other sources and will be taxed.

 


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