Bonus issue is one of the strategic financial action, adopted by companies with strong financials and significant free reserves on their balance sheet. It allows the company to increase its paid-up share capital without raising fresh funds.
A bonus issue refers to the free allotment of additional shares to existing shareholders, based on the number of shares they already hold. These shares are issued without any additional cost, by capitalizing the company’s free reserves, securities premium, or retained earnings.
Section 63 of the Companies Act 2013 and SEBI LODR regulation governed the procedure of bonus issue by a Listed Entity.
Detailed Procedure for Bonus Issue – Listed Company:-
1. Intimation of Board Meeting
As per regulation 29 of SEBI LODR regulation, the company must inform the stock exchange(s) at least two clear working days in advance of the board meeting where the bonus issue is proposed to be considered.
2. Convene the Board Meeting
Company shall hold board meeting, approve the bonus issue, decide ratio, approve the notice of general meeting or approve the notice of postal ballot to be circulated to shareholders for obtaining their consent, if required.
3. Sources of Bonus Issue
Bonus issue shall be made from out of its free reserves or the securities premium account; or the capital redemption reserve account.
4. Submit Board Meeting Outcome
The company must submit the outcome of the Board meeting to the stock exchange(s) within the statutory timelines prescribed under SEBI LODR. And also file corporate action with STX for bonus issue.
5. In-Principle Approval from Stock Exchange
Within 5 working days of the board meeting approving the Bonus issue, company is required to submit pre-listing application to the stock exchange to obtain in-principle approval for listing of bonus issue.
6. Dispatch of Postal Ballot Notice
In case shareholder approval is sought via postal ballot, the company shall in coordination with RTA circulate notice of postal ballot to all the shareholders of the company who are holding shares as on the pre decided cut-off date. Copy of notice of postal ballot shall also be submitted with Stock Exchange on the same day on which it is circulated to shareholders.
7.Newspaper Publication of Notice
The company must publish the notice in one vernacular newspaper in the principal language of the district of the registered office (with wide circulation) and in one English national daily.
8. Remote e-voting
The remote e-voting facility shall be open for 30 days.
9. Scrutinizer’s Report
A scrutinizer, appointed by the Board, will verify and compile the e-voting results. The scrutinizer’s report must be submitted within 48 hours after voting ends. Results must be filed with the stock exchange within 2 working days of receipt.
10. MGT-14
Company must file e-form MGT 14 in compliance with section 117 of the Companies Act 2013.
11. Record Date
Company shall determine the record date for the purpose of identifying the shareholders to whom bonus shares shall be allotted. Record date shall be intimated to STX at least 3 clear working days in advance. Required documents shall be filed with depository for crediting the bonus shares in the demat account of the shareholder on T+1 day, where T is the record date. The shares allotted pursuant to the bonus issue shall be made available for trading on the next working date of allotment.
12. Post-Issue Listing Application
The company must submit the post-issue listing application to the stock exchange on or after the record date, but no later than the next working day after the record date to ensure trading in the shares.
13. File Form No. PAS -3:
The company must then file the return of allotment in the Form PAS – 3 within 30 days of allotment of securities to reflect the updated paid up share capital on Master data of the company.
A bonus issue, while non-cash in nature, reflects a company’s sound financial position and shareholder-centric approach. However, for listed companies, it demands strict adherence to SEBI regulations, Companies Act provisions, and stock exchange compliances.
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