Question

Answer in brief.

State the provisions related to 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:
   • 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 Once the announcement for Bonus Shares is made by the Board of Directors then it cannot be withdrawn.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.