Section 78 - Application of premiums received on issue of securities. - Companies Act, 1956

Application of premiums received on issue of [1] [securities]. 78. (1) Where a company issues 1[securities] at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those 1[securities] shall be transferred to an account, to be called "the 1[securities] premium account"; and the provisions of this Act relating to the reduction of the 1[securities] capital of a company shall, except as provided in this section, apply as if the 1[securities] premium account were paid-up 1[securities] capital of the company. (2) The 1[securities] premium account may, notwithstanding anything in sub-section (1), be applied by the company (a) in paying up unissued 1[securities] of the company to be issued to members of the company as fully paid bonus 1[securities]; (b) in writing off the preliminary expenses of the company; (c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of 1[securities] or debentures of the company; or (d) in providing for the premium payable on the redemption of any redeemable preference 1[securities] or of any debentures of the company. (3) Where a company has, before the commencement of this Act, issued any 1[securities] at a premium, this section shall apply as if the 1[securities] had been issued after the commencement of this Act: Provided that any part of the premiums which has been so applied that it does not at the commencement of this Act form an identifiable part of the company's reserves within the meaning of Schedule VI, shall be disregarded in determining the sum to be included in the 1[securities] premium account. ------------------------------ Notes:- [1] Substituted for the word "share" by the Companies (Amendment) Act, 1999, w.r.e.f. 31-10-1998.