CS S. Dhanapal

Bonus issue refers to a further issue of shares made by a company having share capital to its existing share holders without receipt of any consideration from the shareholders for issuance of the shares. It is an offer of free additional shares to existing shareholders in proportion to their holdings. For example, the company may give one bonus share for every five shares held. These are company’s accumulated earnings which are not given out in the form of dividends, but are converted into free shares.

While the issue of bonus shares increases the total number of shares issued and owned, it does not change the value of the company. Although the total number of issued shares increases, the ratio of number of shares held by each shareholder remains constant.

Companies issue bonus shares to encourage retail participation and increase their equity base. When price per share of a company is high, it becomes difficult for new investors to buy shares of that particular company. Increase in the number of shares reduces the price per share. But the overall capital remains the same even if bonus shares are declared.

Companies Act, 1956, does not prescribe any specific procedure or conditions for issue of bonus shares except that Table A contains provision relating to capitalization of profits. Companies Act, 2013 on the other hand has detailed the conditions for issue of bonus shares and also the sources from which bonus issue can be made. Issue of bonus shares is covered under Section 63 of the Companies Act, 2013 read with relevant (draft) rules issued there under.



Only fully paid up bonus shares can be issued to the members of the company.

Articles must contain provision for issue of bonus shares

Bonus issue must be authorised by the members of the company on recommendation of Board.

Company should not have defaulted in payment of interest or principal in respect of fixed deposits or debt securities issued by it.

Company should not have defaulted in respect of the payment of statutory dues of the employees, such as, contribution to provident fund, gratuity and bonus.

Partly paid-up shares, if any outstanding on the date of allotment, should be made fully paid-up.

The bonus shares shall not be issued in lieu of dividend.

Sources for issue of bonus shares

Free reserves

Securities Premium Account

Capital Redemption Reserve Account

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.

Check eligibility of the company for issuing bonus shares like provision in AOA, no default in payment of dues, no partly paid up shares etc.

Check whether the authorized capital is sufficient for issue of bonus shares

Decided on the quantum of issue

Convene Board Meeting to seek Board’s approval for issue of bonus shares and also to fix the time, date and place for holding general meeting for seeking member’s approval.

Convene general meeting and seek member’s approval for issue of bonus shares.

Convene Board meeting and make allotment of shares

File return of allotment with Registrar of Companies within 30 days of making allotment.

Issue share certificates, update registers and minutes book.

(Written by S.Dhanapal, Senior Partner, S Dhanapal & Associates, A firm of Practising Company Secretaries, Chennai.)

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2 responses to “Issue of Bonus Share Under Companies Act, 2013”

  1. Ranjith says:

    Please anybody response for this

  2. Ranjith says:

    I am Ranjith, I worked in Siemens Limited under external service provider of “Team Lease service pvt ltd”. (From August 2014 – December 2015). They (Team Lease) gave bonus for our employees on Oct 2014 but not given by me due to new joining. But Oct 2015 they have not given bonus to anyone. And then I relieved there and joined new company on 01.01.2016. But now they give bonus to all. I want to know I am eligible for get the bonus from there.

  3. Name says:

    sir if a company wants to issue bonus shares in the month of october out of accumulated free reserves then do they have to get their accounts audited first?

  4. Harshil Shah says:

    No it should be to all the shareholders.

  5. Sonu Aswani says:

    Can a company issue all bonus shares to only one shareholder ?

  6. ayushi says:

    if private company is not paying dividend then, can pvt company issue bonus shares.

  7. Hadirah says:

    Can bonus shares been issued to certain members only instead of all members?

  8. Amit Jain says:

    i have issue bonus share dated 31/03/2014 without special resolution i have take ordinary resolution as per companies act 1956 my quaries is i have file form PAS-3 for bonus share issues PAS-3 form not fulfill without special resolution for bonus share what we do for filing form of pas-3 pl suggest

  9. Reshma says:

    Dear Sir,

    Please clarify whether the pass special resolution or ordinary resolution for issuing bonus shares at the General Meeting. For a private company.


  10. sasangani says:

    whether special resolution passed at EGM for issue of bonus shares will have to be filed with roc before allotment / filing of return of allotment.

  11. rugram says:

    The author admits that bonus shares result in increase in the equity base but also says that ‘the overall capital remains the same even if bonus shares are declared’. This requires some clarification. Thank you.
    In the check list, it may be included that the Stock Exchanges where the shares are already listed for trade, must be advised in advance of the date of the board meeting for consideration of the bonus issue proposal, and also fix date for book closure for eligibility of bonus shares.
    Nowadays, with most companies shares being under compulsory dematerialization, the number of shares to be issued in physical form would be very small. Hence the share registrars have to make suitable arrangements to credit the demat (beneficiary) accounts of eligible shareholders with the number of shares due to be allotted to them.

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