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CHECKS FOR ISSUE OF BONUS SHARES

Check whether Authorized capital is sufficient for issue of Bonus Shares.

1. If Authorized capital is enough to issue bonus shares then it’s ok.

2. If authorized capital is not enough then first alter the Capital of Company by alteration in MOA.

  • Check Provision for Bonus issue in Article of Association of Company.
  • Check availability of resources for issue of Bonus shares.
  • Check availability of resources for issue of Bonus shares.
  • Check Quantum of Bonus shares.
  • Check no default in payment of interest or principle in respect of fixed deposit or debt securities issued by it.
  • Check no default in payment of statutory dues of the employees, such as, contribution to provident fund, gratuity and bonus.

Source for issue of Bonus Shares:

As per Section- 63(1) a company may issue fully paid up bonus shares to its members out of following:

1. Free reserves.

2. Securities Premium Account.

3. Capital Redemption Reserve Account.

Source from which Bonus Shares can’t issue:

  • No issue of bonus shares shall be made capitalizing reserves created by the revaluation of assets. (Company can’t issue Bonus Shares out of reserve create from revaluation of assets).
  • The Company shall not issue shares in lieu of Dividend.

PROCEDURE FOR ISSUE OF BONUS SHARES

STEP:-1

Call the Board Meeting: As per Section 173(3): Issue Notice of at least 7 days for calling meeting of Board of Directors.

STEP-II

Hold the Board Meeting:

  • Check the Quorum as per Section 174(1): Quorum for the Meeting of Board of Directors is 1/3rd of total strength of Board or 2 directors, whichever is higher.
  • Place before the Board Resolution for issue of Bonus Shares.
  • Pass Board Resolution for issue of shares.
  • Decide the Ration of Shares offering to share holders.
  • Fixing the date, time, and venue of the general meeting and authorizing a director or any other person to send the notice for the same to the members.
  • Provisions of the Section 101 of the Companies Act 2013 provides for issue of notice of EGM/AGM in writing to below mentions at least 21 days before the actual date of the EGM/AGM to All the Directors, Members, Auditors of Company
  • The notice shall specify the place, date, day and time of the meeting and contain a statement on the business to be transacted at the EGM.
  • Authorize a director to do all the work relating to issue notice of Bonus issue.

STEP-III

File MGT-14:

File e-form- MGT-14 within 30 days of Passing of Board Resolution for issue of shares.

STEP-IV

CONVENE A GENERAL MEETING:

  • Check the Quorum.
  • Pass Ordinary Resolution for bonus issue of shares.

STEP-V

Call the Board Meeting: As per Section 173(3): Issue Notice of at least 7 days for calling meeting of Board of Directors.

Hold the Board Meeting

  • Pass Board Resolution for allotment of shares.

STEP-VI

File e-form PAS-3 within 30 days of passing of Board Resolution for allotment of shares.

STEP-VII

Company will issue share certificate to the share holders with in 2 month from the date of allotment of shares.

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One Comment

  1. Raj says:

    What is the date on which the free reserves balance should be checked ? Is it the audited balance sheet date i.e 31st March or interim date based on unaudited financials ?

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