Securities Premium Money amount is used for issuing bonus shares or to writr off lossess.
If Securities Premium Money can also be used for Investment purpose by Company??.
If No, then why most small private company is doing so??
Vivek Jain (CS) (205 Points)
07 March 2014Securities Premium Money amount is used for issuing bonus shares or to writr off lossess.
If Securities Premium Money can also be used for Investment purpose by Company??.
If No, then why most small private company is doing so??
Manoj Mehta
(Head Of Department (Accounts & Finance))
(1479 Points)
Replied 07 March 2014
P C Agrawal
(Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad)
(8229 Points)
Replied 07 March 2014
Sec.78(2) of CA 1956 has put certain restrictions on utilisation of Securities Premium A/c. If you see the permitted uses you will find that in Balance Sheet Securities Premium A/c willl be reduced and another liabillity will be created or asset side will be reduced for equivalent amount. However, in case of investment, you are not going to reduce securities premium a/c and hence there is no restriction on this account. You willl be making investment either out of Bank balance (assets side) or out of borrowing, but not out of securities premium a/c.
Vivek Jain
(CS)
(205 Points)
Replied 07 March 2014
Thanks for your reply. However, whatever money utilised from bank is actually pertains to securities premium amount only. If this fact can be established easily, will your reply still hold good??
P C Agrawal
(Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad)
(8229 Points)
Replied 08 March 2014
Yes please. This will of course be subject to compliance of other provisions like Section 372A, RBI Act (relating to NBFC) etc.
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