Section 52 of CA 2013 : Section 52: Application Of Premiums Received On Issue Of Shares

Explanation using Example

Imagine XYZ Pvt. Ltd. issues 10,000 shares at a price of Rs. 150 per share, where the face value of each share is Rs. 100. The extra Rs. 50 collected on each share is the share premium. According to Section 52(1) of The Companies Act, 2013, the total premium amount (10,000 shares x Rs. 50 premium = Rs. 500,000) needs to be transferred to a securities premium account.

Later, XYZ Pvt. Ltd. decides to issue bonus shares to its existing shareholders. The company can use the money in the securities premium account to issue these shares as fully paid-up, which is permitted under Section 52(2)(a).

In another scenario, if XYZ Pvt. Ltd. had incurred Rs. 200,000 as preliminary expenses during its incorporation, it could use the funds from the securities premium account to write off these expenses, as stated in Section 52(2)(b).

Additionally, if XYZ Pvt. Ltd. is a prescribed class of company that complies with specific accounting standards, it may also use the securities premium account to issue fully paid bonus equity shares or write off certain expenses related to equity shares, as mentioned in Section 52(3).