Question

Justify the following statement.

To Issue Bonus Shares, a company has to fulfill certain provisions.

Answer 1

The following provisions the company has to fulfill to issue Bonus Shares:

1. A company can issue Bonus Shares only out of:
   • Free reserves or
   • Securities Premium Account or
   • Capital Redemption Reserve Account
2. A company cannot issue Bonus Shares only out of reserves created by the Revaluation of Assets.
3. The company also cannot issue Bonus Shares instead of paying a dividend.
4. Once the announcement for Bonus Shares is made by the Board of Directors, it cannot be withdrawn.
5. Bonus shares are fully paid-up shares. Shareholders cannot give away their Bonus shares to another person.
6. There is no minimum subscription to be collected.
   Thus, it is rightly justified that, to issue bonus shares, a company has to fulfill certain provisions.
7. ESOS is offered by a company to its Permanent employees, Directors, and Officers.