The issue of bonus shares under the Companies Act, 2013 is governed by Section 63 and SEBI regulations for listed entities, requiring strict procedural and legal compliance. A company must first ensure that its Articles of Association authorize the bonus issue; otherwise, amendment through a special resolution is necessary. The process begins with a Board Meeting to approve the bonus ratio, funding source, and notice of the General Meeting, followed by shareholder approval through an ordinary resolution. Key compliance steps include maintaining proper notice periods, fixing a record date, filing Form MGT-14 (where applicable), and completing allotment within 15 days of approval. Subsequently, Form PAS-3 must be filed with the Registrar of Companies within 30 days, and share certificates or demat credits must be issued within two months. Importantly, bonus shares can only be issued from free reserves, securities premium, or capital redemption reserves, and not from revaluation reserves or unrealized gains, ensuring genuine capitalization of profits.
Governing provisions of Companies Act, 2013:
| 1. Section 63 of the Companies Act, 2013
2. Securities and Exchange Board of India (SEBI) Regulations (for listed companies) |
1. Procedure:
| Sr. No | Steps | Timeline / Date |
| 1. | Authorization in Articles of Association (AOA)
|
|
| 2. | Convene Board Meeting
Board Resolution to recommend bonus issue. Fix Record Date
|
Notice must be sent at least 7 days before the meeting (unless Shorter notice in case of urgent business)
|
| 3. | Issue Notice of General Meeting
|
At least 21 clear days before the meeting. (Shorter notice can be given with the consent of members holding 95% Paid-up share capital of the company) for Conduct EOGM. |
| 4. | Hold General Meeting
Pass Ordinary Resolution approving bonus issue. |
|
| 5. | File MGT-14 (if applicable) | File within 30 days of passing resolution (for certain classes of companies). |
| 6. | Convene a Board Meeting:
The company must convene a Board Meeting approving the allotment of the bonus shares and follow all the protocols for the same. Allotment must be made within 15 days of approval. |
Notice must be sent at least 7 days before the meeting (unless Shorter notice in case of urgent business) |
| 7. | File Return of Allotment (Form PAS-3)
Attach:
|
File with ROC within 30 days of allotment.
|
| 8. | Issue Share Certificates
|
Issue within 2 months from allotment.
|
2. Legal Provisions – Section 63 (Companies Act, 2013)
A company may issue fully paid-up bonus shares out of:
Bonus shares cannot be issued out of:
|
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**This document is for educational purposes only and does not constitute legal advice.
Author : CS Ayushi Jain at M/s Ronak Jhuthawat & Co, Practicing Company secretary Call: +91 98874 22212 | Email: compliancerjac@gmail.com
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