Securities Premium Reserve can be used to:
A. Issue new shares to existing shareholders
B. Write off Preliminary expenses
C. Writing off of Goodwill
D. Premium on Redemption of debentures
E. Issue fully paid Bonus Shares
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → B, D, E Only
Securities Premium Reserve is a capital reserve, and the Companies Act allows it to be used only for a few listed purposes.
A. Issue new shares to existing shareholders Incorrect. It can be used only for fully paid bonus shares; it cannot pay for ordinary new shares issued to the shareholders.
B. Write off Preliminary expenses Correct. Writing off the preliminary expenses of the company is a permitted use.
C. Writing off of Goodwill Incorrect. Goodwill is not among the permitted uses.
D. Premium on Redemption of debentures Correct. Paying the premium on redemption of preference shares or debentures is a permitted use.
E. Issue fully paid Bonus Shares Correct. Issuing fully paid bonus shares is a permitted use.
NCERT (2026-27 edition):
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