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What is Security Premium ? State its uses. |
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Answer» When Shares are issued at a value that is higher than the face value of the shares , the shares are said to have been Issued at Premium, i.e. Issue Price is more than Face Value. The Companies Act, 2013 requires that the amount of the Premium received should be Credited to Securities Premium Reserve Account. Securities Premium Reserve is a Capital Receipt . Utilisation of Securities Premium Reserve Under Section 52 (2) of the Companies Act , 2013 , the amount of Securities Premium Reserve may be used only for the following purposes : – In Writing-off the Preliminary Expenses of the Company . – For Writing-Off the Expenses, Commission or Discount Allowed on Issue of Debentures of the Company . – For Issuing Fully Paid Bonus Shares to the Shareholders of the Company – For providing for the Premium Payable on Redemption of Redeemable Preference Shares or Debentures of the Company . |
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