Radhika Textiles Limited has utilized the securities premium during the financial year 2016-17 as follows: (i) ₹15 lakhs against expenses of foreign travelling of directors. (ii) ₹5 lakhs for writing-off the balance of t

In accordance with the provisions of Section 52(2) of the Companies Act, 2013, the securities premium can be utilised only for: Issuing fully paid bonus shares to members; Writing-off the balance of the preliminary expenses of the company; Writing off commission paid or discount allowed, or the expenses incurred on issue of shares or debentures of the company; For providing for the premium payable on redemption of any redeemable preference shares or debentures of the company; For the purchase of its own shares or other securities under section 68 of the Companies Act, 2013. The validity of the areas of utilization of securities premium balance may be checked against the above provisions. The same shall yield the following results: Validity (i) Amount of ₹15 Lakh against expenses of foreign travelling of directors Company cannot do so as per above provisions (ii) ₹5 Lakh against the writing off the balance of the preliminary expenses of the company Company can do so as per above provisions (iii) ₹10 Lakh distributed as dividend Company cannot do so as per above provisions The premium cannot be treated as profit and as such the amount of premium is not available for distribution as dividend. Secondly, the amount of premium whether received in cash or in kind must be kept in a separate account, known as the 'Securities Premium Account'. Thirdly, the amount of premium is to be maintained with the same sanctity as the share capital.