Companies Act, 2013 - Share Capital and Debentures

Sections 51 and 52 of the Companies Act, 2013: Proportionate Dividend and Securities Premium

Sections 51 and 52 deal with two distinct aspects of share capital. Section 51 permits a company, where its articles authorise it, to pay dividend in proportion to the amount paid-up on each share. Section 52 regulates the securities premium received when shares are issued at a premium and limits the purposes for which that account may be used.

At a glance: Section 51 is an enabling provision and depends on authority in the company's articles. Section 52 requires share premium to be credited to a securities premium account and treats that account, subject to the statutory exceptions, in a manner similar to paid-up share capital for the purpose of capital reduction rules.

Section 51 - Payment of dividend in proportion to amount paid-up

Meaning and effect: A company may pay dividends in proportion to the amount paid-up on each share if its articles of association authorise such payment.

The provision becomes relevant where shares of the same or another class are not equally paid-up. It permits the dividend entitlement to reflect the amount actually paid on the shares, but only where the company's articles contain the necessary authority.

Practical points under Section 51

The company's articles should first be checked for authority to pay dividend in proportion to the paid-up amount.
The provision concerns the basis on which dividend may be apportioned; declaration and payment of dividend must also comply with the other applicable provisions of the Companies Act, 2013.
"Paid-up" refers to the amount credited as paid-up on the relevant share, as applicable under the Act and the terms of issue.

Section 52 - Application of premiums received on issue of shares

When a company issues shares at a premium, whether for cash or otherwise, an amount equal to the aggregate premium received must be transferred to a securities premium account. Except to the extent Section 52 itself permits otherwise, the statutory provisions relating to reduction of share capital apply to that account as if it were paid-up share capital.

Permitted uses under Section 52(2)

Clause	Permitted application of securities premium
Section 52(2)(a)	Issue of unissued shares to members as fully paid bonus shares.
Section 52(2)(b)	Writing off the preliminary expenses of the company.
Section 52(2)(c)	Writing off expenses of, or commission paid or discount allowed on, an issue of shares or debentures.
Section 52(2)(d)	Providing for premium payable on redemption of redeemable preference shares or debentures.
Section 52(2)(e)	Purchase of the company's own shares or other securities under Section 68.

Section 52(3) - Special application for prescribed classes

Section 52(3) contains a separate rule for such class of companies as may be prescribed whose financial statements comply with the accounting standards prescribed for that class under Section 133. For such companies, the securities premium account may be applied for the purposes specified in Section 52(3), including fully paid bonus equity shares, specified equity-issue expenses or commission, and purchase of own shares or other securities under Section 68.

Compliance note: A securities premium account is not a general-purpose reserve. Before using it, the company should identify the exact statutory clause authorising the proposed application and also check the applicable accounting standards, rules and other provisions governing the underlying transaction.

Section 52 expressly refers to Section 68 for purchase of a company's own shares or other securities and Section 133 in relation to accounting standards. Depending on the transaction, other provisions relating to bonus shares, redemption, buy-back, share capital and financial statements may also apply.

Official legal resources

Last reviewed: 16 September 2026. This page is a general legal information resource; the current Act, applicable rules, notifications and accounting standards should be checked for a specific transaction.