Issue of Bonus Shares

 A bonus issue, also known as a scrip issue or a capitalization issue, is an offer of free additional shares to existing shareholders. A company may decide to distribute further shares as an alternative to increasing the dividend payout. For example, a company may give one bonus share for every five shares held.

Bonus issue means offer of free additional shares to the existing shareholders. A company may decide to distribute further shares as an alternative to increase dividend payout. Bonus shares may be issued by company to restructure the company’s reserves. Issue of bonus shares will increase the company’s cash flow but the net asset of the company will remain same.

Major Points for issuing Bonus Shares:

1. Issue of Bonus shares article should be existed in Articles of Association of the company;
   
   
2. Sufficient authorised capital to issue bonus shares;
   
   
3. There is no default of the company regarding
• Payment of interest of principal of fixed deposit or debt securities
• Payment of statutory dues of the employees such as, contribution to PF, gratuity and bonus. [Section 63(2)(c)(d) of the Companies Act, 2013]
  
  
4. There should not be partly paid-up shares outstanding on the date of allotment;
   
   
5. Bonus shares must have to be fully paid up It can be issued out of Free Reserves, the Securities Premium Account or the Capital Redemption Reserve Account
   
   
6. Issue of Bonus shares will increase in number of shares of the Company but it can reduce the share price.
   
   
7. The board, recommending a bonus issue, shall not subsequently withdraw the same.

Bonus Issue Process:

1. Notice and agenda for conducting the Board meeting should be circulated at least 7 days prior to the Meeting.
   
   
2. The Board Meeting should be recommended for
   
• Considering and recommendation of issue of Bonus Shares to the existing shareholders.
• Deciding the ratio and quantum of issuing bonus shares.
• Fixing up the day, date, time and venue for Extraordinary General Meeting of the shareholders of the company and approving the notice convening said meeting.
  
  
3. Form MGT-14 should be within 30 days of passing of Board Resolution.
   
   
4. Sending of the notice of General Meeting to the Members of the company more than clear 21 days notice either in writing or through electronic mode in such manner prescribed under the act.
   
   
5. Convening the General Meeting of the company for taking approval for bonus issue.
   
   
6. Conducting Board Meeting for passing of resolution for allotment of shares and issuing share certificates.
   
   
7. Filing of return of allotment in Form PAS-3 within 15 days from the date of passing Board Resolution for Allotment.
   
   
8. Updation of Members Register.