Question

State the provisions related to Bonus Shares.

State the provisions related to the issue of Bonus Shares.

Answer 1

Bonus issues refer to the fully paid-up shares given to its existing equity shareholders without any cost, based upon the number of shares they have. Provisions related to Bonus Shares are as follows:

1. A company can issue Bonus Shares only out of:
   1. Free reserves or
   2. Securities Premium Account or
   3. 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 Once the announcement for Bonus Shares is made by the Board of Directors, then it cannot be withdrawn.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.