Question

Kriya Ltd. wants to issue fully paid-up shares to its existing shareholders, whereas Aakash Ltd. plans to issue new shares to its existing shareholders for increasing the subscribed capital of the company. Name the types of securities which Kriya Ltd. and Aakash Ltd. want to issue. Contrast these securities on any two bases.

Answer 1

Securities types: Kriya Ltd. wishes to give its current owners Bonus Shares. Aakash Ltd. intends to provide its current owners Right Shares. Comparing the securities.

1. Basis 1: Purpose of Issue: 
   1. Bonus Shares: As a kind of dividend reinvestment, these shares are given to current owners at no cost, usually from the company's reserves or retained earnings.
   2. Right Shares: To raise more money for the business, these shares are made available to current shareholders at a discount.
2. Basis 2: Impact on Shareholding:
   1. Bonus Shares: The ownership proportion of shareholders does not change when bonus shares are issued, and no new money is raised.
   2. Right Shares: The corporation can raise money by issuing right shares, and by subscribing to the new shares, shareholders can expand their ownership stake.