Securities Premium Account can be used only for the following purposes:
(A) To issue partly paid bonus shares to the extent not exceeding unissued share capital of the company;
(B) Buy back of own shares.
(C) To write-off the expenses of, or commission paid, or discount allowed on any securities of the company;
(D) To pay premium on the redemption of preference shares or debentures of the company.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (B), (C) and (D) only
Securities Premium is not free profit; the law allows it to be used only for a short list of purposes, and any use outside that list is not allowed.
(A) To issue partly paid bonus shares to the extent not exceeding unissued share capital of the company Incorrect. Securities premium can be used to issue fully paid bonus shares, not partly paid ones.
(B) Buy back of own shares. Correct. Buy-back of the company’s own shares is a permitted use.
(C) To write-off the expenses of, or commission paid, or discount allowed on any securities of the company Correct. It can write off the expenses of, commission paid or discount allowed on any securities of the company.
(D) To pay premium on the redemption of preference shares or debentures of the company. Correct. It can pay the premium on redemption of preference shares or debentures.
The one word “partly” is what knocks out (A), so read each statement for such changed words.
NCERT (2026-27 edition):
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