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Can securities premium account be used as working capital

ABHISHEK JAIN (SERVICE) (35 Points)

11 March 2016

DEAR FRIENDS,

CAN SECURITIES PREMIUM ACCOUNT BE USED AS WORKING CAPITAL OF A PRIVATE COMPANY AS PER COMPANIES ACT, 2013?

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4 Replies

CA Raj Doshi (Practising CA) (8924 Points)
Replied 13 March 2016

Yes. There is no such restriction to hold securities premium in escrow account. Co can use it for business purposes including working capital

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ABHISHEK JAIN (SERVICE) (35 Points)
Replied 20 March 2016

.Can securities premium be used as working capital? Give reason in support of your answer.(All India 2011; HOTS) Ans. Securities premium cannot be used as working capital. According to Section 52 (2) of the Companies Act, 2013, the securities premium can be applied only for the following purposes: (i) Issuing fully paid bonus shares to the members. (ii) Writing-off the preliminary expenses of the company. (iii) Writing-off the expenses on issue of shares, commission paid on any issue of shares or debentures of the company and discount allowed on any issues of shares and debentures. (iv) Providing for the premium payable on the redemption of redeemable preference shares or debentures of the company.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 21 March 2016

Securities Premium cannot be used for the purposes except as specified in section 52(2).

Securities Premium Account can be applied by the Company:

1. towards the issue of unissued shares of hte company to the members of hte company as fully paid bonus shares;

2. in writing off the preliminary expenses of the Company;

3. in writing off the expenses of , or the commission paid or discount allowed on, any issue of shares or debentures of the Company;

4. in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the Company; or

5. for the purchase of its own shares or other securities under section 68.

Prachi Bansal (3129 Points)
Replied 09 March 2021

Some companies also charge expenses on the securities premium account, which are suppose to be charged to The P/L A/C in order to get deductions. what will be the treatment to such a case? will there be any penalty or charges?