Debenture premium received on issue of debentures cannot be used for which of the following?
Answer & explanation
Correct answer: option 3
Section 52 of the Companies Act, 2013 states that the security premium can only be utilized or for the following purposes:
For the issue of fully paid bonus share capital
For meeting the preliminary expenses incurred by the company
For meeting the expenses, commission or discount incurred concerning securities previously issued by the company
For ensuring the availability of the premium on the redemption of redeemable debentures or preference share capital of the company
For funding a scheme or buy-back of securities which is conducted in compliance with the provisions of Section 68 of the Companies Act
Thus, it cannot be used either for writing off loss on sale assets or bad debts.
For the issue of fully paid bonus share capital
For meeting the preliminary expenses incurred by the company
For meeting the expenses, commission or discount incurred concerning securities previously issued by the company
For ensuring the availability of the premium on the redemption of redeemable debentures or preference share capital of the company
For funding a scheme or buy-back of securities which is conducted in compliance with the provisions of Section 68 of the Companies Act
Thus, it cannot be used either for writing off loss on sale assets or bad debts.