The amount of security premium cannot be used for:

The correct answer is Option (4) → Purchase of assets of the company.

Securities premium is part of the company’s capital, not free profit, so the law allows it to be used only for the listed purposes. Buying assets for the business is not one of them; assets are paid for out of the company’s ordinary funds.

• Option (1) Issuing fully paid bonus shares to the extent not exceeding unissued share capital of the company. — A permitted use. The premium can pay up bonus shares issued to members, within the unissued capital.

• Option (2) Buy-back of own shares. — A permitted use. A company may use the premium to buy back its own shares.

• Option (3) Paying premium on the redemption of preference shares or debentures of the company. — A permitted use. The premium payable on redemption may be met out of securities premium.