An issue of bonus shares is referred to as a bonus share issue or bonus issue. A bonus issue is usually based upon the number of shares that shareholders already own. While the issue of bonus shares increases the total number of shares issued and owned, it does not change the value of the company. 1) The source out of which Bonus Shares shall be issued The company shall issue fully paid Bonus Shares out of any one of the following source: · Free reserves of the company · The securities premium account · The capital redemption reserve account
An issue of bonus shares is referred to as a bonus share issue or bonus issue.
A bonus issue is usually based upon the number of shares that shareholders already own. While the issue of bonus shares increases the total number of shares issued and owned, it does not change the value of the company.
1) The source out of which Bonus Shares shall be issued
The company shall issue fully paid Bonus Shares out of any one of the following source:
· Free reserves of the company
· The securities premium account
· The capital redemption reserve account
2. Source out of which the company shall not utilise for the purpose of issue of Bonus Shares
· The company shall not issue bonus shares by capitalizing reserve created out revaluation of Asset.
· The company shall not issue shares in lieu of Dividend.
3. Secretarial formalities to be complied with
In order to capitalize its profits or reserves for the purpose of issue of bonus shares the
Company has to comply with the following:
· The article of association of the company should authorise such issue.
· The board has to recommend the issue of bonus shares
· The company in a general meeting should authorise the issue of bonus shares.
4. Company not eligible in issuing bonus shares
· It has defaulted in repayment of deposit.
· It has defaulted deposit interest.
· It has defaulted in debt securities.
· It has defaulted in respect of payment of statutory dues of the employee’s viz., contribution to Provident Fund, Bonus and Gratuity.
· Any outstanding partly paid share remains unpaid.
· Ensure that once the decision of board regarding bonus issue is announced, then it cannot be withdrawn subsequently.