Securities Premium cannot be used for the following purpose:

The correct answer is Option (4) → Purchase of shares of some other company.

Securities Premium is money received from shareholders above the face value of shares. It is not a free reserve, so it can be used only for the purposes the law lists. Buying the shares of some other company is an investment of the company’s funds, and it is not one of those purposes; only the purchase of the company’s own shares (buy-back) is.

• Option (1) To issue fully paid bonus shares to the extent not exceeding unissued share capital of the company. — A permitted use. The premium can be turned into fully paid bonus shares, within the unissued capital.

• Option (2) To write-off preliminary expenses of the company. — A permitted use. The expenses of forming the company can be written off against it.

• Option (3) To write-off the expenses of, or commission paid, or discount allowed on any securities of the company; — A permitted use. Costs of issuing the company’s own securities can be set off against it.