Hi all,
A Pvt Ltd received the premium on issue of preference shares (which are convertible pref shares), Later some year the company wants to issue equity shares to the preference shareholders at par and premium received on issued preference shares can be refunded in cash during that time ?
Or else only Section 78 applies- utilization of security premium.
Awaiting reply.
Hi u r right that section 78 applies - we can use the security premium only for the limited purposes specified in that section.
As per my knowledge, only when the company is liquidated, the amount standing in the security premium can be distributed in cash to the shareholders.
No, Company can not pay the premium in cash to them according to Sec. 78. They can issue Equity Shares at premium.
and Share Call money can received only by Bank no Cash transaction are allowed.
ya cash cannot be paid
we can use the security premium only for the limited purposes specified in that section 78.
(2) The SECURITIES premium account may, notwithstanding anything in sub-section (1), be applied by the company-
(a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares;
(b) in writing off the preliminary expenses of the company;
(c) in writing off the expenses of, or commission paid or discount allowed on, any issue of shares or debentures of the company; or
(d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.
Agreed with the learned members Securities Premium Account can be used for limited purposes as mentioned under section 78.
As per sec 78 premium received on issue of securities cannot be refunded in cash..but only can b utilised in writing off preliminary expenses..or discount or commission on issue shares n debentures, for paying premium on redemption of pref.shrs or debentures, utilised for issue of fully paid bonus shares...
Thanks a lot friend....
no it cant be refunded
CAclubindia
