The amount of Securities Premium can be used only for the following purposes:
(A) To write off preliminary expenses.
(B) To make partly paid shares as fully paid up.
(C) To issue fully paid bonus shares.
(D) Purchase of its own shares.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (C) and (D) only
Securities premium is money received above the face value of shares. The law allows it to be used only for a closed list of purposes, so a use outside that list is not allowed however sensible it looks.
(A) To write off preliminary expenses. Correct. Writing off the company’s preliminary expenses is one of the listed purposes.
(B) To make partly paid shares as fully paid up. Incorrect. Premium can be used to issue fully paid bonus shares, but not to pay up the unpaid amount on shares already issued.
(C) To issue fully paid bonus shares. Correct. This is allowed, up to the unissued share capital of the company.
(D) Purchase of its own shares. Correct. Buy-back of its own shares is one of the listed purposes.
NCERT (2026-27 edition):
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