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security premium

Umang Rathore (45 Points)

29 November 2018

can security premium a/c be used for setting off losses

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kapil gupta (217 Points)
Replied 29 November 2018

As per section 52 of companies Act,2013 which deals with security premium prescribes that
secruity premimum whether recieved in cash or otherwise shall be credited to seprate account called sec. premium account and if utilised except allowed by this section shall be treated as reduction of share capital and provisions of section 66 of the Act shall apply accordingly.
Sec 52 prescribes that security premimum can be utilised for :-
1.For issuing fully paid up bonus shares u/s63 of the Act.
2 for buy back of securties u/s 68 of the Act.
3.for writting off preliminary expenses.
4.For paying premimum on redemption of prefrence shares and debentures,as the case may be.
5.For writting off issue related expenses and discount allowed on issue of debentures.
Also companies following accounting stds. as per sec 133 can utilised Sec premium for purpose 1,2 and 5 only.
In the light of above provisions sec. premium can't be utilised for setting off losses if utilised shall be treated as reduction as aforesaid.
Thanks.

1 Like

Law Aspire (CS) (755 Points)
Replied 30 November 2018

we can transfer it in general reserve and use it for Loss set off?

Umang Rathore (45 Points)
Replied 30 November 2018

I think not because it should and can only be used for above mentioned points

kapil gupta (217 Points)
Replied 30 November 2018

transfering security premium to general reserve first of all don't fall in either cases.
So set off is not possible at all.
Thanks

Law Aspire (CS) (755 Points)
Replied 01 December 2018

Originally posted by : kapil gupta
	transfering security premium to general reserve first of all don't fall in either cases.So set off is not possible at all.Thanks

what is the use of general reserve?

kapil gupta (217 Points)
Replied 01 December 2018

Generally General reserves are created by company for meeting contigencies but Under some provisions of companies Act,2013 has precribed uses of general reserves like
Under section 123 of the Act if company don't have profit for declaration of dividend then conpany pay dividend out of reserves (Rule 3 of that chapter prescribes that)
Oher uses like buy back of shares,issuing fuy paid up bonus .
Thanks