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Monday, October 23, 2017
You are here : BONUS ISSUE

BONUS ISSUE

bonus issue


Issue of shares can be done through various methods like right issue basis, preferential allotment, bonus shares etc. Bonus Issue is one of the method for issue of shares in a company Bonus issue has been defined in Section 63 of the Companies Act, 2013. Bonus issue means further issue of shares by a company having share capital to its existing shareholders without receipt of any consideration from the shareholders for issue of shares. These are the accumulative earnings of the company.
When the price of the company is high, it becomes difficult for new investors to buy shares of that company in that case company issue bonus share, this will increase the number of shares and alternatively reduces the price of the company.

SOURCES FOR ISSUING BONUS SHARES
As per Section 63(1) of the Companies Act, 2013 company can issue fully paid up bonus shares to its members out of the following-
1. Free Reserves
2. Securities Premium Account
3. Capital Redemption Reserve


CONDITION FOR ISSUE OF BONUS SHARES-
1. Articles must contain a provision for issue of bonus shares if articles does not contain such provision that articles must be altered first.

2. Only fully paid up shares can be issued. Partly paid up shares can’t be issued in case of bonus issue.

3. Company should have not defaulted in payment of interest or principal in respect of fixed deposits or debt issued by the company and should not have defaulted in respect of statutory dues of the employees.

4. If there are any partly paid up shares in the company outstanding at the time of bonus issue then they have to be converted into fully paid up shares.

5. Check whether the company has sufficient authorized capital, if not so then increase the authorized capital.


PROCEDURE-
1. Sent notices of the board meeting for holding board meeting atleast 7 days before the meeting

2. Hold the board meeting and pass resolution for issue of shares. Decide the time and date for holding extraordinary general meeting and authorize director for issuing notices to the shareholders for calling EGM. In the meeting decide no of shares to be issued.

3. The notices of the EGM should be send atleast 21 days before the meeting and along with the notice of the meeting their should be attached explanatory statement.

4. Hold the EGM and take approval of shareholders for issuing bonus shares. Ordinary resolution is required to be passed in the EGM.

5. Again hold a board meeting and pass a final board resolution for allotment of shares.

6. File form pas-3 within 30 days of the allotment of the shares.

7. Issue share certificates to whom shares has been allotted.

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