Issue of Bonus Shares
Bonus shares are additional shares given to the existing shareholders without any additional cost, based upon the number of shares that a shareholder owns.
Companies Act, 1956 did not have any provisions regulating the issue of bonus shares. Private Limited Companies and Unlisted Public Companies were free to issue bonus shares if they have free reserves to cover the bonus issues. However, Listed Public Companies intending to issue bonus shares have to comply with the SEBI (Disclosure and Investor Protection) Guidelines, 2000. Currently, the Companies Act, 2013 has introduced the regulations for bonus issues through Section 63 of the Companies Act, 2013.
Section 63 of the Companies Act, 2013 –
1. Sources from which bonus shares may be issued – A company may issue fully paid-up bonus shares to its members out of –
(a) its free reserves;
(b) the securities premium account; or
(c) the capital redemption reserve account.
2. Sources from which bonus shares will not be issued –
(a) No issue of bonus shares will be made out of its revaluation reserves
(b) Bonus shares shall not be issued in lieu of dividend.
3. Other regulatory measures – No company shall capitalize its profits or reserves for the purpose of issuing fully paid bonus shares unless-
(a) it is authorized by its articles;
(b) the Board has recommended such issue in the general meeting of the company;
(c) it has not defaulted in payment of interest or principal in respect of fixed deposits or debt securities issued by it;
(d) it has not defaulted in respect of payment of the statutory dues of the employees;
(e) the partly paid-up shares, if any outstanding on the date of allotment, are fully paid-up;
(f) once the decision of the Board recommending the bonus issue has been announced, it shall not subsequently withdraw the same.
SEBI Guidelines on Issue of Bonus Shares –
9. Consequent to the issue of Bonus shares if the subscribed and paid-up capital exceed the authorized share capital, a Resolution shall be passed by the company at its general body meeting for increasing the authorized Capital.
Issue of Bonus Shares
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