Question

In addition to the purchase of own shares by a company and to issue fully paid bonus shares, for which of the following purposes security premium account balance could be used?
(A) To write-off preliminary expenses of the company.
(B) To pay premium on the redemption of preference shares or debentures of the company.
(C) To write-off the expenses of, or commission paid, or discount allowed on any securities of the company
(D) To pay the issue price of debentures.
Choose the correct answer from the options given below:

• A. (A), (B) and (C) only
• B. (A), (B) and (D) only
• C. (A), (B), (C) and (D)
• D. (B), (C) and (D) only

Hint:

Section 52 allows securities premium for bonus shares, preliminary expenses, issue expenses or discount, and redemption premium. Paying the issue price of debentures is not on that list.

Answer 1

The Correct Option is A

Step 1: Start from the law:
Section 52 of the Companies Act, 2013 lists what a company may do with its securities premium account. Anything outside that list is not allowed. So we test each purpose against the list and then pick the option that matches.

Step 2: Think about what the account is:
The premium is capital money received above face value. The law lets it be used for capital-type adjustments: bonus shares, buy-back, early costs of raising capital, and the premium paid at redemption.

Step 3: Sort the four purposes:
(A) Preliminary expenses: a cost of setting up the company, so it is allowed.
(B) Premium on redemption of preference shares or debentures: allowed.
(C) Expenses, commission or discount on issue of securities: allowed, these are costs of raising capital.
(D) Issue price of debentures: this is simply a payable amount, not a capital adjustment, so it is not allowed.

Step 4: Compare with the options:
The set of valid purposes is {A, B, C}. Only option 1 lists exactly A, B and C. The other three options each include D, so they fail.

Final Answer:
The correct combination is A, B and C. \[\boxed{\text{Option 1}}\]