Article explains The source out of which Bonus Shares shall be issued, Source which company shall not utilise for the purpose of issue of Bonus Shares, Secretarial formalities to be complied with for Bonus Share Issue, Company not eligible for issuing bonus shares and Provisions and procedures relating to issue of shares through bonus issue under Companies Act, 2013.
Definition- 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.
Page Contents
- 1. The source out of which Bonus Shares shall be issued
- 2. Source which company shall not utilise for the purpose of issue of Bonus Shares
- 3. Secretarial formalities to be complied with for Bonus Share Issue
- 4. Company not eligible for issuing bonus shares
- 5. Provisions and procedures relating to issue of shares through bonus issue
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
- 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.
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.
- 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- Ensure that once the decision of board regarding bonus issue is announced, then it cannot be withdrawn subsequently.
S. No. | Procedure for Bonus Issue |
1. |
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2. | Find out availability of resources for issue of bonus shares as fully paid-up bonus shares can be issued to members out of:
> The free reserves > The securities premium account > The capital redemption reserve account Provided that no issue of bonus shares are made by capitalising reserves created by revaluation of assets. |
3. | The bonus shares shall not be issued in lieu of dividend. No issue of bonus shares shall be made capitalizing reserves created by the revaluation of assets.
Check availability of resources for issue of Bonus shares. |
4. |
> at least 7 days before the date of board meeting or > in such manner as prescribed under section 173(3) of the Companies Act, 2013 and clause 1 of the Secretarial Standard-1. |
5. |
Approval of notice for calling of general meeting for passing resolution for issuance of bonus shares. |
6. | File e-Form MGT-14 with the Registrar of Companies regarding board resolution for issuance of bonus shares in case of public companies as private companies are exempted to file board resolution for issuance of bonus shares. |
7. | Prepare draft minutes of the board meeting and circulate, within a period of fifteen days from the date of conclusion of that meeting, to all directors, by hand/speed post/registered post/courier/e-mail or by any recognised electronic means, for their comment(s). |
8. | Send notice of general meeting to all directors, shareholders, auditors, secretarial auditors and Debenture Trustee, if any, of the company at least 21 days before the date of general meeting. However, notice may be given at a shorter period of time if consent in writing is given thereto, by physical or electronic means, by not less than ninety five percent of the members entitled to vote at such meeting in case the matter is considered in Annual General Meeting, however, if the matter is taken in Extra Ordinary General Meeting, then shorter notice of general meeting may be given subject to consent of majority members entitled to vote and who represent not less than ninety-five per cent of such part of the paid-up share capital of the company as gives a right to vote at the meeting.
(However, private companies can opt their own regulations with respect to notice of General Meeting.) |
9. | Convene general meeting and pass special resolution for issue of bonus shares. The Act requires about general meeting resolution, but while filing PAS-3 in case of allotment of shares through bonus issue, it requires for SRN of MGT-14 for special resolution, so better to pass special resolution. |
10. | Maintain proper record for:
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11. | Prepare draft minutes of shareholders’ meeting and for finalization, send the draft minutes to the chairman of that meeting. |
12. | File eform MGT-14 with the Registrar of Companies within 30 days of passing of special resolution along with explanatory statement. |
13. |
> at least 7 days before the date of board meeting or > in such manner as prescribed under section 173(3) of the Companies Act, 2013 and clause 1 of the Secretarial Standard-1. |
14. | Convene board meeting to pass the following resolutions:
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15. | Prepare draft minutes of the board meeting and circulate, within a period of fifteen days from the date of conclusion of that meeting, to all directors, by hand/speed post/registered post/courier/e-mail or by any recognised electronic means, for their comment(s). |
16. | Prepare list of allotees for filing with the Registrar of Companies. |
17. | File the e-Form PAS-3 along with attachments within 30 days of allotment with the Registrar of Companies. |
18. | In case of Private Limited Companies:
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19 | In case of Public Limited Companies:
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20. | Make necessary entries in register of members within seven days after passing of board resolution for allotment of shares. |
21. | Ensure—
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Is there any stipulation regarding balance reserves as percentage of expanded capital