Dear Friends,
During internal audit of a pvt company....i came across share premium account.
As per sec 78 of Companies Act, this amount cant be used for day-to-day activities of business...so how can i ensure that the same is followed by the company..
I mean what should a company do with such premium money...whether they can use it for any investment....?
If not what can a pvt company do with such amount.
Please Discuss.
Mr. sidharth,
Sorry for late reply, I just came across your query.
Company can invest the security premium amount to invest some other place as board thinks fit.
It is to note that definition given in Sec 372A regarding free reserve specifies it and says that while calculating ceiling limit of loan to be under this section includes the S/P amount.
Apart from that purpose for which S/P may be used is stated u/s 78.
Regards,
Vikash
SKAA & Associates
New Delhi
CA Inter
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